Sebi mulls variable load structure for MF distributors

Securities & Exchange Board of India (Sebi) is looking to have a variable load structure for mutual fund distributors. The commission in the variable load structure regime, as proposed by the Association of Mutual Funds in India (Amfi) board, would depend on the quality and nature of service and advice given to an investor. 

Speaking to reporters after the one day seminar ‘ICC Mutual Fund Summit 2008’ organised by the Indian Chamber of Commerce here on Saturday, Sebi executive director R K Nair said: “In global markets, investors have a choice. They have different load for different services. We too are working towards it.” 

Incidentally, entry load is a charge levied on investors by a mutual fund in case an investor decides to invest in the scheme. Open ended mutual fund schemes charge anything between 2 % and 2.5% of the amount invested under different heads like marketing cost and distribution commission. 

Elaborating further, Amfi chairman A P Kurian said, the commission paid to distributors is not linked to the quality or extent of service as well as the nature or quality of advice. 

“In case Sebi clears the proposal, distributors along with the investor can jointly work out their commission depending on the quality of service or the nature of advice. The rate will largely depend on the extent of service and advice gven to the investor and will find mention in the investor’s application form,” he added.' 

“Since the variable load factor regime is a common practice in developed markets, Indian mutual fund industry should also strive towards this,” Mr Kurian said. 

This apart, Amfi is also working to have a structured common application format for all mutual fund schemes across the country instead of having different application forms from different mutual fund houses. The association is yet to take up the issue with Sebi.

Japanese giants eye Indian MF market

Though the market meltdown has hit the domestic mutual fund industry and affected investor sentiment temporarily, it hasn’t deterred global biggies from going ahead with their India plans. At least three financial giants from Japan — known for their conservative approach — are looking at setting up asset management business in India. 

Japanese financial conglomerates — Nikko, Nomura and Shinsei Bank — are exploring various options to enter the Indian mutual fund market, top mutual fund sources said. Nomura, which has signed an MoU with Life Insurance Corp (LIC), is likely to get a stake in LIC Mutual Fund. Shinsei Bank already has a relationship with India as it runs an asset management business with Guernsey-based UTI International Ltd, a wholly owned subsidiary of UTI Asset Management Company. 

“The Indian mutual fund industry has a huge growth potential and foreign players are looking at tapping it,” said Association of Mutual Funds of India chairman A P Kurian. “Some Japan-based pension funds are also looking at investing in India. But they’re likely to come as foreign institutional investors registered with market regulator Sebi. A major reason for the increasing Japanese presence in India is that they are wary of the kind of returns they can hope for in saturated US and European markets,” said a mutual fund source. 

It is not only Japanese companies that are making a beeline to enter the growing MF market but European companies are also heading to South Asia. While UK-based Schroder has plans to set up shop in the coming months, Belgium-based KBC Asset Management Company has announced its joint venture with Union Bank of India. Union Bank will have a 51 per cent stake in the joint venture company while KBC will hold the remaining 49 per cent stake. 

These new entrants will face tough competition from other foreign players like UBS, Goldman Sachs Group, Morgan Stanley and Credit Suisse, which have been studying the market dynamics for quite some time now. 

To cash in on the 50-60 per cent growth in assets under management that the industry has seen in the past, domestic stock broking houses are also eyeing a share of the pie. Indiabulls, Motilal Oswal and India Infoline also have plans to launch MF schemes soon. The average assets under management of the industry fell by 6 per cent in July to Rs 5.30 lakh crore.

ICICI Mutual Fund And Others May Face Competition From Aviva India

"As part of our expansion strategy in Asia Pacific and keeping in mind the opportunity India presents, we would like to enter into asset management business as soon as possible," Aviva India Managing Director Bert Paterson said. 

However, the company is yet to decide about the structure, he said, adding the company is looking at a number of ways in which it could be set up. 

"We are considering what the various options might involve, but we have no specific plans to announce at the moment," he said. 

"The company has not yet engaged Securities and Exchange Board of India," he added. 

Of the total 20 life insurance players, about 9 already have their asset management arm. Prominent among them include ICICI Prudential, Reliance Mutual Fund, HDFC Mutual Fund and SBI Mutual Fund.
Source : www.business-standard.com

JM Multi Strategy Fund

JM Multi Strategy NFO ( an Open Ended Equity Fund) today, a brief is mentioned here. 

Launch Date : 31st July’08
Closing Date : 29th August’08

JM Multi Strategy Fund will have an active investment strategy which changes with the changing markets. 

Identifying the future market scenario and identifying stocks that are likely to outperform will be critical in managing the fund. JM Multi Strategy will seek to adopt a portfolio strategy depending on the prevailing market conditions; the scheme will either adopt a growth or a value style of investing.

During bullish market conditions, the scheme will act like an aggressive growth fund with a concentrated portfolio of say 25 to 30 stocks and a targeted portfolio beta of greater than 1.

However,in a bearish market, the scheme will have a low volatility conservative portfolio of a larger number of stocks in the range of 40 to 60 stocks with a targeted portfolio beta of less than 1.

The scheme may have to regularly churn its portfolio at periodic intervals in order to achieve the investment objective and as such the portfolio turnover ratio could be high.

 

The intention is that in these market conditions the fund will switch between aggressive and defensive large caps depending on the market conditions. The fund will have large caps to an extent of 90 to 95%. 

Load Structure: 

Entry Load Exit Load 

In case of investments <>2.25%
In case of investments >= Rs. 2 crores : Nil

In case of investments <>1% if redeemed within 1 year of allotment / transfer of units. 
In case of investments >= Rs. 2 crores: 0.5% if redeemed within 3 months of allotment/transfer of units 
In case of investments made through Systematic Investment Facility : Nil

In case of investments made through Systematic Investment Facility: 2.25% if redeemed within 2 year of allotment / transfer of units of respective installments.

Reliance Cap, HSBC, ICICI join SBI to manage EPFO fund

New Delhi, July 29 In a move that may have far-reaching impact on the future income of the Employees Provident Fund Organisation (EPFO), the largest provident fund in the country on Tuesday decided to induct three private sector fund managers — the Anil Ambani-led Reliance Capital AMC, HSBC AMC and ICICI Prudential AMC — as its new fund managers.
SBI monopoly ends 

This ends the age-old monopoly of State Bank of India, which will, however, continue as the sole public sector fund manager.

The organisation has a corpus of about Rs 1,55,561 crore (at face value) as on March 2007 and around four crore subscribers.

The inclusion of Reliance came as a last minute surprise as the company did not figure in the recommendations placed before the Central Board of Trustees (CBT) by its Finance and Investment Committee (FIC).

The FIC had recommended only two private sector players. The Labour Secretary, Ms Sudha Pillai, told reporters after the meeting that “the CBT has decided to allow Reliance Capital, ICICI Prudential, HSBC and SBI to manage provident fund of employees.”
Same score.

Officials said that SBI and Reliance had the same score in the financial bid, but SBI had a better technical bid evaluation with 81 points out of 100 while Reliance had scored 77 out of 100. The CBT took the decision based on the financial bid, they said.

The CBT Member and Secretary of the Hind Mazdoor Sabha, Mr A.D. Nagpal, who is also a member of the FIC, told Business Line after the meeting that “The FIC had not recommended Reliance. We have put our dissent on record,” he said.
Management fee.

According to the bids approved on Tuesday, Reliance and SBI will get an investment management fee of 10 paisa for every Rs 1,000 managed (0.01 per cent). ICICI Prudential and HSBC AMC will receive 7.5 paisa and 6.3 paisa, respectively, for every Rs 1,000 managed by them.

Source: http://www.thehindubusinessline.com/

HDFC Equity's Stock Selection Strategy

HDFC Equity Fund, one of the top performers in the Indian market has been around for 13 years now. [Originally from ITC Threadneedle then to Zurich and then into HDFC AMC] The silent and soft-spoken Sr. Fund Manager, Prashant Jain who rarely comments in the media has released a note celebrating 13 years of HDFC Equity Fund.

One thing that is worth noticing in the note is the stock selection procedure adopted by the company sticking to its internal process of "Avoiding the Big Mistakes" [ Real Estate, Brokerage Houses etc]. He further said,
Owning strong businesses, that are likely to grow earnings at above market rates. Focusing on long term prospects and valuations and ignoring short to medium term market aberrations i.e ignoring momentum stocks / stocks with excessive valuations if not justified by fundamentals. Remain diversified with exposure to mid-caps varying between a third to fourth of portfolio.

ABN Amro appoints two new key personnel

ABN Amro Mutual Fund has two new key personnel joined AMC, Ms Aparna Karmase and Ms Monaz Elavia with effect from 9th July, 2008. Ms Aparna Karmase is designated as Compliance Officer, Risk Manager and Company Secretary at the age of 30. She is LLB and has done ACS from Institute of Company Secretaries of India. She worked as Company Secretarial & Legal Department - KJMC Global Market (India) Ltd till October 2002; Ms Monaz Elavia is designated as Head of Client Service department at the age of 32 and has done studies in Bachelor of Arts. She worked with Vodafone as Customer Service Executive till Aug 1999.

Benchmark MF Files Offer Document With Sebi

Benchmark Mutual Fund filed offer document with Sebi to launch Shariah BeES. The Benchmark Mutual Fund has filed the offer document with the Securities and Exchange Board of India (Sebi) for launching a dedicated scheme of Shariah Benchmark Exchange Traded Scheme (Shariah BeES). It's an open-ended exchange listed index scheme. The minimum application amount under the scheme is Rs. 10000 and in multiple of Re 1 thereafter. ach unit of the scheme being offered will have a face value of Rs.10 each and will be issued at a premium approximately equal to the difference between face value and 1/10th of the value of the S&P CNX Nifty Shariah Index.