Thursday, January 5, 2012

Sebi allows UTI Asset Management to launch new schemes after gap of 5 months.

The Securities and Exchange Board of India (Sebi) has allowed UTI Asset Management, India's fifth-largest mutual fund, to launch new schemes again after a gap of almost five months. The move comes as a relief to UTI, which was barred by the regulator from launching any fresh scheme in August 2011, till it gets a new chief, as the mutual fund was losing out on opportunities to garner money for its short-term debt products in a firm interest rate regime.

Sebi, in a communication to the fund house last week, said it could launch the five-series of fixed-term income schemes and a gold fund for which it had applied to the regulator earlier. But the letter is silent on whether the fund house could apply for new schemes other than the ones approved now.

A top UTI Asset Management official confirmed the development. "In a high interest rate scenario, FMP as a product category has done well and is expected to be an attractive opportunity," said Jaideep Bhattacharya, group president and chief marketing officer of UTI AMC.

UTI Asset Management has been headless for almost a year now since its former CMD UK Sinha moved to Sebi as its chairman. After Sinha moved out, the daily operations of the fund house is being overseen by four officials - Jaideep Bhattacharya; Imtaiyazur Rahman, chief finance officer; Anoop Bhaskar, head-equities and Amandeep Chopra, head of fixed income.
But rules do not permit a mutual fund to launch products without the approval of its chief executive officer. With an impasse over the appointment of a new chief for UTI, the fund house has been losing out to its peers in terms of product launches.

"We had written to Sebi to allow us to launch new schemes as the processes are already in place," said another senior executive of the fund house. The independent directors of the UTI AMC board have already written twice to all the five shareholders, asking them to speed up the appointment process.

"Independent directors have raised concerns on the delay in appointment as they are forced to be involved with the daily operations of the fund house since they don't have the expertise for the same," said a person familiar with the development.

UTI Mutual Fund's five shareholders are SBI, LIC, PNB, Bank of Baroda and T Rowe Price. Late last year, two independent directors, Anita Ramchandran, who was the acting chairperson of UTI AMC, and Prithvi Haldea stepped down from the board citing personal reasons. They are yet to be replaced on the board.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/sebi-allows-uti-asset-management-to-launch-new-schemes-after-gap-of-5-months/articleshow/11370658.cms

MFs move to partial portfolio disclosures

Some fund houses now disclose 60-80% of the monthly portfolios of equity schemes instead of full disclosure earlier
Does too much transparency hurt anyone? Apparently, the Rs. 7.12 trillion Indian mutual fund (MF) industry thinks that disclosures should be made within limits. Some fund houses now disclose only 60-80% of their monthly portfolios of their equity schemes instead of the earlier full portfolio disclosures. While fund houses such as Fidelity Fund Management Ltd and JPMorgan Asset Management (India) Ltd have been cautious about disclosing their portfolios ever since they launched in India (2005 and 2007, respectively), others such as HDFC Asset Management Co. Ltd and AIG Global Asset Management Co. (India) Ltd started the practice of partial disclosures in 2011.

According to the capital markets regulator, Securities and Exchange Board of India (Sebi), all MFs are mandated to disclose complete portfolios of all their schemes twice a year, as part of their half-yearly mandatory disclosures, in the months of March and September. Till about 2004, most fund houses used to stick to Sebi’s rules but over time private sector fund houses started disclosing portfolios every month on their websites. Eventually, all fund houses moved to full portfolio disclosures every month.

Tracking portfolios

Though most MFs disclose portfolios every month on their websites and through fact sheets so that investors know where their money gets invested, some MFs feel that it’s not just investors who track its moves. AIG AMC’s July-end fact sheet says: “As part of portfolio management, we regularly keep buying/selling stocks and sometimes we were unable to complete our transactions within a month and such names are visible in the portfolio as marginal names. We feel that disclosure of such names inhibits our ability to efficiently operate in markets and ultimately hurts your interest as investors in our fund.” Fund managers who share AIG’s observation say that this is a problem especially in cases where the fund buys scrips in phases. A large-sized fund, typically, takes over a month to buy scrips especially when it wants to build a strong position in it, such as making it one of the top 10 scrips of the portfolio. They claim that some market operators have sophisticated computer software built in their systems to track such movements for ulterior motives. AIG Global AMC stopped disclosing scrips that take up less than 2% of the corpus effective July 2011. HDFC AMC stopped disclosing about 20% of portfolios across its equity funds effective July 2011. The MF, however, discloses full portfolios after a time lag of two months.

Nandkumar Surti, managing director and chief executive officer of JPMorgan AMC, says that it is not very difficult for people in the market to track what fund houses are buying. “When you compare two months’ fact sheets in successive months, there will be few names whose presence in the portfolio means that the fund house is in the process of acquiring or selling them. We don’t want these market operators to do front-running in those scrips,” he says. Front-running is an activity by which a person who is privy to the trading information of a large institution places its trades minutes before the large entity. For instance, a stock market dealer (who is closely tracking an MF) could enter with his own personal order for the shares of a company if he suspects the fund house is buying a scrip in phases, and gets a lower price. When the fund continues to buy the same scrips over a period of time and build positions, the price will usually rise since it is a large order; the dealer would have already built his position by then.

In 2005 when Fidelity Fund launched in India, it broke away from the trend and started to disclose its portfolios only twice a year. Its chief executive officer, Ashu Suyash, had told us at that time, “very frequent disclosures do not help the investor. If an investor can track what stocks we’re buying and then invest in the fund, perhaps he is so evolved that he is better off managing his own portfolio.” Instead, Fidelity used to disclose the top 10 portfolios of all its schemes along with the fund manager’s commentary. Around three years back, Fidelity started to publish full portfolios every month, but with a time lag of one month. So, say by 10 January 2012, while most fund houses would have published their December 2011 portfolios, Fidelity will publish its November 2011 portfolio.

Does it really matter?
Not all are convinced. Bhanu Katoch, chief executive officer of JM Financial Asset Management Ltd, says that such protective disclosures help only large-sized fund houses. “If small-sized fund houses have negligible assets under management, I doubt if there are market operators who track them so closely. However, if a large-sized MF limits its disclosures, it’s understandable,” he says. Though JM Financial discloses about 90% of its portfolios, Katoch claims partial disclosure is because of the non-disclosed portion consisting of scrips that take up less than 2% of the total corpus or “negligible holdings”.

Source: http://www.livemint.com/2012/01/04203251/MFs-move-to-partial-portfolio.html?h=B

Mutual funds lose Rs 16,000 cr in 2011

The mutual fund industry took a hit of more than Rs 16,000 crore on its asset size during 2011, even as the newly-crowned market leader HDFC MF grew in size and consolidated its top position.

As per the latest quarterly data released by Association of Mutual Funds in India (AMFI), the cumulative average Asset Under Management (AUM) of all fund houses stood at about Rs 6,87,640 crore in the last quarter of 2011.

This marked a decline of Rs 16,040 crore from a total of Rs 7,03,680 crore in the first quarter or January-March period of 2011.

The experts attributed the fall to the sharp losses in the stock markets, as also to the withdrawals by investors. The funds typically collect money from investors to invest in various asset classes including stocks and debt securities.

The loss was even larger for the cumulative asset base of the top five fund houses (HDFC, Reliance, ICICI Pru, Birla Sunlife and UTI Mutual Funds), as their total average AUM declined by Rs 31,741 crore in the same period to end the year at Rs 3,60,733.14 crore.

At the end of 2011, HDFC Mutual Fund retained its leadership position with total average AUM of Rs 88,737.07 crore. It marked an increase of Rs 2,455 crore from the levels in the first quarter of 2011.

HDFC MF was the only one among top five fund houses to register an increase in this period, as the remaining four saw their AUMs decline.

Reliance MF's average AUM dipped by Rs 17,417 crore to Rs 84300.35 crore, while that of ICICI Prudential MF dipped by Rs 4,080 crore to Rs 69472.08 crore.

Birla Sunlife MF's average AUM dipped by Rs 3,327 crore to Rs 60406.30 crore, while the decline was larger at Rs 9,371 core for UTI MF, whose average AUM stood at Rs 57817.34 crore in the October-December quarter of 2011.

At the end of 2011, there were a total of 44 fund houses in the country, as against 42 in the first quarter.

Source: http://www.expressindia.com/latest-news/Mutual-funds-lose-Rs-16-000-cr-in-2011/895740/

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  • Principal Emerging Bluechip fund (Stock picker Fund) 11%
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  • HDFC Prudence Fund (Balance Fund) 9%
  • ICICI Prudential Dynamic Plan (Dynamic Fund) 9%
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  • IDFC Savings Advantage Fund (Liquid Fund) 6%
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  • HDFC TOP 200 Fund (Large Cap Fund) 8%
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