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Mutual Fund industry assets up by 9.5%

The Indian Mutual Fund industry is on front foot once again. The industry’s assets under management (AUM) have risen by about 9.5% in Jan ’09 vis-à-vis Dec ’08. This is the second consecutive monthly rise in the AUM after a series of downfalls witnessed in the last quarter of 2008. Earlier the assets had risen by around 5% in Dec ’08.
With an asset base of Rs 4,60,949 crore, the industry may still have a long way to go to regain its highest absolute peak ever of Rs 6 lakh crore. However, in percentage terms, this rise is pretty significant as growth in January ’08 is second highest after Oct ’07. In last 15 months, growth in AUM has been over 10% on only two occasions.
LIC Mutual Fund is once again the biggest AUM gainer in percentage terms. Its assets are up by over 30% since last month to Rs 18,731 crore. This AMC had earlier reported a rise of over 23% in AUM for the month ended Dec ’08.
Other asset management companies (AMC) to have recorded significant rise in assets include IDFC, DWS Investments, Birla Sun Life, Tata, Principal, ICICI Prudential and Kotak. Each of these AMCs has recorded an increase of over 10% in their AUM.

While Reliance continues to be the largest player of the industry with an asset base of Rs 76,168 crore, followed by HDFC at Rs 51,420 crore, there has been a re-shuffling for the third position. ICICI Prudential has once again overtaken UTI to be the third largest fund house of the country. It has reported an increase of about 13.5% in its AUM which currently stands at Rs 47,515 crore against UTI’s 46,161 crore.

Source:http://economictimes.indiatimes.com/Personal_Finance/Mutual_Funds/MF_News/Mutual_Fund_industry_assets_up_by_95/articleshow/4070266.cms

Mutual Fund industry assets up by 9.5%

The Indian Mutual Fund industry is on front foot once again. The industry’s assets under management (AUM) have risen by about 9.5% in Jan ’09 vis-à-vis Dec ’08. This is the second consecutive monthly rise in the AUM after a series of downfalls witnessed in the last quarter of 2008. Earlier the assets had risen by around 5% in Dec ’08.
With an asset base of Rs 4,60,949 crore, the industry may still have a long way to go to regain its highest absolute peak ever of Rs 6 lakh crore. However, in percentage terms, this rise is pretty significant as growth in January ’08 is second highest after Oct ’07. In last 15 months, growth in AUM has been over 10% on only two occasions.
LIC Mutual Fund is once again the biggest AUM gainer in percentage terms. Its assets are up by over 30% since last month to Rs 18,731 crore. This AMC had earlier reported a rise of over 23% in AUM for the month ended Dec ’08.
Other asset management companies (AMC) to have recorded significant rise in assets include IDFC, DWS Investments, Birla Sun Life, Tata, Principal, ICICI Prudential and Kotak. Each of these AMCs has recorded an increase of over 10% in their AUM.

Open-ended mutual funds offer better returns

The pressure of redemptions, i.e. investors exiting from the fund, has given nightmares to many a seasoned fund manager. Open-ended mutual funds, which by definition allow investors to exit at any point, are run by fund managers who keep higher levels of cash aside for redemptions.
But being prepared for the worst scenario could have ‘helped’ openended mutual funds which have outperformed their closed-ended peers in the last 12 months, an analysis shows.
While top close-ended equity diversified funds have grossed (-) 44% in the one year, their top open-ended peers have given (-) 33% in the same time. As an investor, this means 10% of your money was saved if you chose an open-ended scheme. Both types of funds being ‘diversified’ meant they chose wide variety of stocks to hedge their risks but still a wide gap persists.
“One reason could be the optimal design for open funds,’’ Prateek Agrawal, head of equity at Bharti AXA Investment Managers, said. “Open-ended funds have to be prepared for both inflows and outflows.’’
Mutual fund industry analysts point out that fund managers in open-ended schemes keep 15-20% of assets in cash and cash related instruments to meet redemptions. Top open-ended funds such as Birla Sun Life Dividend Yield Plus, UTI Dividend Yield, IDFC Imperial Equity, DSP BlackRock Top 100 Equity and UTI Contra could have scored on this point.
Putting beside more cash left less room for open funds to remain less invested in themes such as mid-caps and smallcaps, which meant that they (open funds) were stuck with less illiquid stocks.
“A good number of fund houses zeroed in on the close-end structure to invest in small and mid-cap themes or infrastructure/construction stocks. These stocks were known to hold long term potential but were also among the most illiquid stocks,’’ said a fund manager of a closed-ended scheme.
Top closed-ended funds such as Tata Equity Management, UTI India Lifestyle, Fortis Sustainable Development, Sundaram BNP Paribas Equity Multiplier and LIC MF Top 100 were perhaps exposed to some illiquid stocks. Once trading volume thins, illiquid stocks are the ones more difficult to dispose off.
Dhirendra Kumar, CEO of fund tracking company Value Research, feels fund management for close-ended funds has been less intensive in the past one year.
“Most close-ended funds used to charge initial launch expenses of a new fund offer till 2007. This was stopped from January 1, 2008. Would fund management companies be interested at a similar level then? Launches of new close-ended funds have been minimal since then and existing funds were less-intensely managed,’’ Kumar said.

Source: http://economictimes.indiatimes.com/Personal_Finance/Mutual_Funds/Open-ended_mutual_funds_offer_better_returns_/articleshow/4070274.cms

Once again Reliance MF adjudged best fund house

Reliance Mutual Fund, part of the Reliance Anil Dhirubhai Ambani Group, has been adjudged the best fund house in India and Vikrant Gugnani the best CEO by Asia Asset Management, a journal of investments and pensions based in Hong Kong.
Asia Asset Management magazine is a monthly publication focusing on the institutional fund markets in the Asia Pacific region. The award is for the 12-month period ended December 2008.
Commenting on the awards, Leehock Tan, publisher of Asia Asset Management, said, “We have seen that Reliance Capital Asset Management Ltd continues to expand both its domestic and international franchise, re-affirming its dominance as the leading mutual fund house in India. Amidst the global economic crisis, its recent growth has been impressive. Thus, their commitment to the industry deserves to be recognized.”
On this recognition, the newly-appointed CEO of Reliance Mutual Fund, Sundeep Sikka, said, “This recognition is very special as it comes from an international and a very credible institution endorsing us as the Best Fund House in India. We convey our gratitude to our investors and partners who have been the driving force towards our success. Such recognition makes us more committed towards serving our investors with better products and services.”
Gugnani was the CEO of Reliance Mutual Fund from October 2005 to December 2008, and was instrumental in taking the company to leadership position and making it the most trusted brand amongst asset management companies, the company said in a press release.

Source: http://economictimes.indiatimes.com/Personal_Finance/Mutual_Funds/Reliance_MF_adjudged_best_fund_house/articleshow/4041672.cms

Benchmark Mutual Fund launches first-ever Shariah compliant ETF

The market for Shariah funds is set to grow with Benchmark Mutual Fund launching the first-ever Shariah Benchmark Exchange-traded scheme in India. It’s an open-ended listed index scheme.

The scheme will be benchmarked against the S&P CNX Shariah index, an index that was launched by Standard & Poor’s and India Index Services & Products. Each unit is priced at 1/10th of the S&P CNX Nifty. The scheme will open for subscription on February 4 and close on February 25.
The S&P CNX Shariah index comprises stocks that are Shariah compliant. As a result, the fund will not invest in business activities related to pork, alcohol, gambling, financials, advertising and media (newspapers are allowed and sub-industries are analysed individually), pornography, tobacco and trading of gold and silver.
At present, the Nifty Shariah Index comprises 37 constituents as on January 13, 2009 and includes stocks such as Reliance Industries, Infosys Technologies, ONGC, Gail, Hindustan Unilever, Reliance Capital, State Bank of India, Tata Motors, HDFC, ICICI Bank among others.
Shariah-based equity investments do not allow investors to invest in excessive debt companies (no investments in companies that have debt-to-marketcap exceeding 33 per cent), companies with high outstanding receivables (net receivables in excess of 45 per cent of market cap) and companies that do not have at least 25 per cent of its capital in fixed assets.
“There is a big Muslim population here. We hope they will be interested in investing in this fund especially since this is the first fund of its kind,” said Rajan Mehta, executive director at Benchmark asset management.
While Shariah funds have had a limited run in the Indian markets so far, they could pick up given the kind of products that are coming into the market. HSBC Asset Management has also launched a Shariah portfolio scheme for affluent Indian investors.
The HSBC Amanah India Shariah Portfolio is an actively managed open-ended equity offering wherein investors can invest in conformity with Islamic Shariah principles. The minimum investment amount for this customised product in Rs 25 lakh.
In November 2008, markets regulator, Securities and Exchange Board of India (Sebi) also gave the go-ahead to Taurus mutual fund and its joint venture partner, Parsoli Corporation to set up a Shariah-compliant mutual fund. However, the fund house is yet to launch the product.
Globally, Shariah-compliant investments total around $65 billion. Of these, around 53 per cent of the assets or $35 billion, is held in mutual funds out of which $33.6 billion is managed by local fund managers and $1.4 billion is managed by foreign fund managers, according to the Asia Investor magazine website.
Saudi Arabia is the largest market in the world for Shariah mutual funds measured in terms of number of funds or by assets.
In Asia, Malaysia is also the most important market for Shariah funds. Internationally, other prominent markets for Shariah products are Middle East countries, Indonesia, Pakistan, United States and South Africa.

Source: http://www.business-standard.com/india/news/benchmark-mutual-fund-launches-first-ever-shariah-compliant-etf/01/09/347466/

SEBI Seeking Transparency

Last week, SEBI rolled out yet another set of new rules governing the operation of mutual funds in the country. Like the ones in early December, these new rules too are a response to the crisis faced by debt funds during the October and November. In December SEBI moved to shut off the early redemption route out of closed-end funds. It mandated that liquidity should be provided not by the fund companies themselves but by listing them on stock exchanges. The October crisis was precipitated by investors pulling out money from funds whose portfolios were not designed for early redemptions.
Now, SEBI has moved forward another few steps and blocked a range of questionable practices that exist in the debt funds. Firstly, the regulator has banned fund salesmen from stating indicative yields or portfolios to investors. This practice is common in Fixed Maturity Plans. Effectively, fund companies often work out a debt portfolio in consultation with the actual borrowers and then go and hawk this portfolio to investors. Since the portfolio and its yield were known beforehand, these were openly shared with potential investors. During the credit crisis things didn't really work out the way they were supposed to and many funds deviated from the portfolios and underperformed the yields.
SEBI has now banned this mode of working. Obviously, no fund will now publish these indicators publicly. However it remains to be seen whether informal, oral communication of this nature between funds and large investors actually get stopped.
SEBI has also made a set of changes to the rules governing Liquid Funds. These funds are intended for parking money that investors can spare for very short-term periods of times ranging from days to weeks. They are supposed to be run in a maximally risk free manner. This basically means that they should be investing in debt instruments with very short maturity, because such investments react minimally to interest rate changes. During the crisis, it came out that plenty of liquid funds had invested some of their corpus in longer-maturity investments in order to gain some extra returns. Although this would have worked out fine had the crisis not occurred, the very purpose of liquid funds is to ensure that the investments perform as expected regardless of any crisis. As such, what liquid funds were doing was stretch the safety part of their mandate in order to deliver some extra returns.
The regulator has now mandated that liquid fund managers rein in their maximum maturities to six months by February 1 and further to three months by May 1. They are supposed to get out of all those securities that are over these limits. This will go a long way in giving these funds the kind of safety level that they should have. Yet another change that SEBI has done is a more curious one. There is a class of funds that is called 'Liquid Plus' funds. SEBI wants their names changed to something else because, in the words of the circular, 'the nomenclature of "Liquid Plus Scheme" should be discontinued since it gives a wrong impression of added liquidity'. Liquid Plus schemes actually have less liquidity and the 'plus' part refers to the fact that they try and give greater returns than vanilla liquid funds. Liquid Plus funds are also more tax-efficient than liquid funds.
I would have thought that both these category of funds are primarily used by professional investors who wouldn't be misled by nomenclature but anyhow, greater transparency is always welcome. It must be pointed out that all the ills that these rules plug loopholes that basically allowed fund managers to serve up higher returns to investors who wanted those returns. Like the rest of the financial world, neither of the two were overly mindful of risk. Now, having received the fright of their lives, everyone will stay well within limits till the next cycle starts.

Source: http://www.valueresearchonline.com/story/h2_storyview.asp?str=12633

HSBC India fund unit head of equities quits

HSBC's (HSBA.L: Quote, Profile, Research) Indian mutual fund unit head of equities, Mihir Vora, has resigned, a top official said on Thursday.
"He has put in his papers but he is still with us for some time to ensure that there is smooth transition," Vikramaaditya, chief executive of HSBC Asset Management (India) Pvt Ltd, told Reuters.
The firm was yet to decide on a replacement, he added.
Vora could not be reached immediately for his comments.
Last month, the fund house lost its head of fixed income Shailendra Jhingan to ICICI Securities, while Pioneer Global, the fund arm of Italy's bank UniCredit (CRDI.MI: Quote, Profile, Research), hired HSBC fund manger Alok Sahoo as head of fixed income earlier this month.
HSBC Asset Management, which had an average assets under management of about 101 billion rupees in December, has promoted Suyash Choudhary as fixed income head.

Source: http://in.reuters.com/article/domesticNews/idINBOM42259920090129