Mirae’s fund to invest in Brazil, Russia, China firms

Mirae Asset Mutual Fund has filed offer document with SEBI for an equity-oriented fund that will invest in equities of leading companies having their primary activity in Brazil, Russia or China.

The proposed fund will invest 65-100 per cent in equities of companies operating in Brazil, Russia or China and listed on any recognised stock exchange, says the offer document. The fund will have the option of investing up to 35 per cent in Indian equities and equity-related securities or money market instruments, debt securities instruments.

The fund will be benchmarked against the MSCI -BRC (Brazil, Russia & China) Index. The RBI in April 2008 raised the overall overseas investment limit for the mutual funds from $5 billion to $7 billion.

Mutual funds make big purchase in June

They bought when markets corrected sharply

July 4 With net purchases of Rs 3,179 crore in June 2008, mutual funds have made their biggest purchases in the stock market since January this year, last month. 

The sharp fall in the equity values in June may have prompted mutual funds to indulge in ‘value buying’. In June, out of the 21 trading days, the BSE Sensex ended in the red on 14 days. 

Mutual funds have been net buyers on 16 of the 21 trading days this month. The index shed close to 21 per cent and during this period, the index PE multiple fell from 19.3 to 15.9. Mutual funds’ buying has also been evident on many days when the markets corrected sharply. 

For instance, after the June 4 correction of 447 points in the Sensex, MFs made net investments to the tune of Rs 547 crore the next day. Funds also remained net purchasers of stocks when market declined continuously for 5 trading days starting from June 18.

However, assets under management of mutual fund industry witnessed a 5.9 per cent drop in June, buckling under the pressure of the meltdown in the stock market and the slow growth in the fixed income schemes in the month. The BSE Sensex tumbled about 18 per cent from 16,415.57 to 13,802.22 in June, while the NSE’s S&P CNX Nifty crashed 17 per cent in June.

According to Association of Mutual Funds India data, the combined average assets under management of the 33 fund houses dropped to about Rs 5.65 lakh crore at the end of June compared with about Rs 6 lakh crore in May. 

FIIs have, however, been at the other side of the table, selling Rs 10,500 crore worth of stocks in June, which was the main cause for the stock to witness steep fall.

Foreign jaunts, commissions dry up for MF distributors

If you are wondering why your neighbourhood mutual fund agent is not holidaying either in the Alps or on the beaches in Maldives or Mauritius at this time of the year, blame it all on the Sensex.
The secular decline in stocks for the better part of this year, coupled with the market regulator Sebi’s move to amend a key clause in the fee structure for mutual funds, has seen fund houses going slow on the incentives they offer to MF agents. But industry officials say this could well be a blessing in disguise as fund houses will now be more prudent with the money they dedicate to distribution.
Over the past few years, the need to score over competition in terms of assets under management was forcing fund houses to come up with innovative ways to keep the top performing agents in good cheer. Besides being paid commissions for the money they bring in, these distributors also got loyalty bonuses and foreign trips as top ups for their performance. But with the benchmark indices heading southwards, investor sentiment has gone for a toss.
New fund offerings have now dried up and freebies to distributors such as trips to London or Singapore are also now being sparingly offered by fund houses.
Industry watchers also say MF houses not being allowed to charge fees over a period of time — called amortisation in technical terms — for close-ended schemes is a key reason for this change. Putting open-ended schemes on par with close-ended ones was the last major reform that M Damodaran, SEBI former chief, brought in, before demitting office.

Kotak Asset Management chief executive, Sandesh Kirkire says that with fresh investments from retail investors drying up and markets ruling flat, it is obvious that “distribution spend” at fund houses has come down. “How much funds spend in the critical process of reaching the investor through the distributor is direct function of the flows,” he adds.
He also points out that Sebi banning amortisation has meant that there is absolutely no difference between new fund offerings and existing schemes, as far as distributors are concerned. So, the incentive structure has to change over a period of time, he adds.
The head of a large national distribution agency says most of the trips that have taken place over the past couple of months were the ones planned a long time ago — ICICI Prudential AMC recently took its platinum category distributors to an all-paid trip to Shanghai. “But fresh trips are not on the horizon anymore,” he quips.
A few local trips on specific projects, he predicts, will be the norm in months to come. Sunil Subramaniam, who heads marketing and distribution at Sundaram BNP Paribas, says earlier fund houses spent extravagantly on distributors.
“Now, there will be more accountability, as in only performers will be rewarded,” he says.

Bank of Baroda signs deal for mutual fund JV with Pioneer Group

The Indian public sector bank, Bank of Baroda (BOB) signed a joint venture agreement with Pioneer Investments Management Ltd with 51% stake in the existing Bank of Baroda Asset Management Co. (AMC) Ltd that currently manages AUM of Rs 41 crore (as on 30TH June, 2008). The AMC will be renamed Baroda Pioneer Asset Management once the deal is complete. The Pioneer Group manages assets worth more than €237.5 billion (as on 30 June, Rs. 13.04 trillion then) and is present in more than 20 countries worldwide. The group is also looking at including an Indian product in the groups international fund umbrella which is distributed across Europe and the US. Pioneer is two times the size of what they were six years earlier and can make investments as required into India, Pioneer is re-entering the mutual fund business in India before in 1993, it had entered into a 50-50 joint venture with the Chennai-based Shyam Kothari family (through ITI, or Investment Trust of India). The joint venture would help the bank enlarge its basket of products to 29 million global customers with existing 1,100 branches in India and plans to open ten overseas branches in 2008-09, more than 63 offices abroad whereas on the domestic front, the bank plans to add 91 branches by September.

Escorts AMC launch Escorts Leading Sectors fund

Escorts Mutual fund has launched Escorts Leading Sectors Fund with the face value of Rs. 10 per unit. The offer opened on 3rd July, 2008 and closes on 1st Aug, 2008. The minimum investment amount is Rs 5000 and in multiple of Re 1 thereafter. The primary investment objective of the scheme is to provide capital appreciation or income distribution by investing in companies from leading sectors, depending upon their growth prospects and sustainability of future earnings growth. The fund will invest up to 70% in equities and equity related instruments with medium to high-risk profile and 30% in debt instruments, government bonds and money market instruments. The scheme will charge an entry load of 2.25% for purchase of less than Rs.5 crore. No entry load will be charged for purchase of Rs.5 crore and above. The scheme offers growth and dividend option. Dividend option will provide with the sub-options of dividend payout and reinvestment facility. It will benchmark itself against S & P CNX Nifty.

Taurus in Expansion Mode

Taurus AMC which is one of the smallest by AUM is planning to expand and compete with 34 players in the Indian mutual fund industry which has the AUM 5.6 trillion in June 2008. The AMC has announced the appointment of Mr. Kumar Nathani who was earlier with SBI fund management is now joining Taurus AMC as the fund manager for fixed income funds from 1stJuly, 2008. The fund house is planning to launch two fixed income funds in the next 12 months and the investment management team is increasing to four people in next two months. The fund house will add at least 130 people to its existing staff which is around 50 and even double investment management team to 12.

IDFC mutual plans India GDP Growth Fund

India's IDFC Asset Management filed initial papers with the market regulator on Friday to launch an equity fund that will invest in firms representing the constituents of the country's gross domestic product (GDP).
IDFC India GDP Growth Fund will invest at least 65 percent of its assets in agriculture, industry and services sectors, the three components of India's GDP, in proportion to their contribution to the overall GDP Growth, the firm said.
The fund will invest up to 35 percent of the assets in debt and money market instruments, the offer document said.

Buffett's Berkshire Has Worst First Half Since 1990

It must be a bear market because even billionaire Warren Buffett's Berkshire Hathaway Inc. has slumped 20 percent since December.

The decline exceeds the drop of the Standard & Poor's 500 Index and marks the worst first half for the Omaha, Nebraska- based investment and holding company since 1990. Price competition has driven down revenue at Berkshire's insurance units, which account for about half of its income.
Berkshire is ``close to getting more fairly priced,'' said Charles Hamilton, a Nashville, Tennessee-based analyst at FTN Midwest Securities Corp., who has a ``neutral'' rating on Berkshire. ``I wouldn't say it presents a buying opportunity right now.''
After reporting record 2007 earnings of $13.2 billion, the 77-year-old Buffett told shareholders in February that profit margins from insurance will drop.
``That party is over,'' Buffett wrote in his annual letter to shareholders in February. ``It is a certainty that insurance industry profit margins, including ours, will fall significantly in 2008.''
Berkshire also has been hurt by the declines of Wells Fargo & Co., American Express Co. and U.S. Bancorp, three of the company's 10 biggest equity holdings at the end of March. Wells Fargo, Berkshire's second-largest holding, dropped 18 percent in the second quarter, while American Express and U.S. Bancorp slipped 14 percent.
Buffett Bulls
Berkshire declined $1,435 to $118,665 at 4 p.m. in New York Stock Exchange composite trading, and is down 20 percent since its all-time closing high of $149,200 on Dec. 10. That exceeds the 17 percent slide of the S&P 500 in the same period. Berkshire spokeswoman Jackie Wilson didn't respond to a request for comment.
The slide hasn't deterred Buffett devotees, who think Berkshire's decline represents a buying opportunity.
``I'd put a new client in Berkshire right now,'' said Frank Betz, a partner at Warren, New Jersey-based Carret Zane Capital Management, which oversees $800 million, including Berkshire shares. ``It's probably the highest-quality collection of individual companies that's ever been assembled. Long slides are not in the Berkshire Hathaway lexicon.''
Berkshire bulls are betting with history on their side: the shares advanced in 17 of the past 20 years. The last annual decline was 3.8 percent in 2002. The company had record earnings last year as Buffett booked a $3.5 billion profit on a $500 million investment in oil producer PetroChina Co., and insurance units made money selling coverage against storms that never came.
`Chaotic Markets'
The decline in financial shares may provide Buffett an opportunity to boost holdings, said Whitney Tilson, a principal at New York-based hedge fund T2 Partners, which counts Berkshire among its investments.
``Where Buffett makes his money is taking advantage of weak, chaotic markets,'' Tilson said. ``The odds that Buffett could do a large transformative deal have gone up substantially.''
Buffett built Berkshire over four decades from a failing maker of men's suit linings into a $185 billion company. He plows revenue into companies whose management he trusts and whose business models he deems superior. The billionaire's Berkshire stake makes him the world's richest person, according to Forbes magazine.
With Berkshire's $35 billion in cash, Buffett can scoop up bargains on beaten-down securities and make acquisitions while near-frozen credit markets curb purchases by leveraged buyout firms, Tilson said.
Bond Insurance
Buffett entered the bond insurance business in December as the largest companies in the industry, MBIA Inc. and Ambac Financial Group Inc., struggled to maintain their credit ratings. CIT Group Inc., the lender that lost about 84 percent of its market value in 12 months, said yesterday that a Berkshire subsidiary agreed to pay $300 million for its portfolio of loans backing factory-built homes.
Tilson calculates the so-called intrinsic value of Berkshire's assets and operations at $157,000 a share. The stock reached intrinsic value in 11 of the past 12 years, Tilson said.
This year's gap emerged amid a drop in commercial property rates from their peaks after Hurricane Katrina in 2005. Property and casualty prices in the U.S. fell 14 percent in the first quarter from the same period a year earlier, according to a survey by the Council of Insurance Agents and Brokers.
Housing Slump
Berkshire, which owns National Indemnity, General Re Corp. and Geico Corp., saw first-quarter earnings from underwriting insurance policies fall 70 percent to $181 million. Pretax underwriting profit at Berkshire Hathaway Reinsurance Group, which sells catastrophe coverage, dropped 95 percent.
Also damaging to Berkshire's earnings is the biggest housing slump since the Great Depression, which slowed the company's building-related businesses, including Acme Brick and Shaw Industries, the world's largest carpet manufacturer.
Consumers fell behind on loans secured by their homes at the fastest pace in two decades in the first quarter, the American Bankers Association reported today.
Buffett says the U.S. is mired in ``stagflation,'' a period of slowing economic growth and accelerating inflation.
``We're right in the middle of it,'' Buffett said in a June 25 interview. ``I think the `flation' part will heat up, and I think the `stag' part will get worse.''
An economic recovery isn't ``going to be tomorrow, it's not going to be next month, and may not even be next year,'' he said.
Tilson and Carret Zane's Betz say they'll wait. Berkshire gained 26-fold since 1988 in NYSE trading -- a return more than three times greater than the S&P 500.
``I sleep well,'' Tilson said. ``It's not going to double overnight, but we think it will in five years, which is a 15 percent compounded annual rate. It's the stock you want to own.''