MFs’ Nifty futures exposure up 2.5 times in 1 year

Nifty--the darling of the trader and investor community in Indian equity markets--is on the radar of the mutual fund managers. Fund houses
increased their exposure to Nifty derivatives from Rs 1,225 crore, or 0.65 per cent of the total assets under management under equity, balanced and ELSS funds, to Rs 1,827 crore, or 1.64 per cent, in February. This amounts to 2.5 times increase in the quantum of derivative exposure, an analysis of the data provided by valueresearchonline.com about fund holdings since March ’08 till February ’09 reveals. Says a fund manager under the condition anonymity, “Normally when one takes exposure to Nifty futures the possibility of under-performance is very low. In fact, there is a case wherein Nifty futures trades at a discount to the spot. And this is primary advantage one has while taking exposure to Nifty futures. Even the transaction costs involved in buying Nifty futures is marginal.” Another factor that has resulted in the increased exposure to Nifty derivatives is the uncertainty in the performances of sectors. The number of schemes that took exposure to Nifty derivatives also increased from 12 to 30 over the same period. Though the participating schemes have grown multi-fold the exposure has gone up by 50 per cent, thanks to the market meltdown. DSP Blackrock (6schemes) and ICICI Prudential (9 schemes) are the two prominent players that took exposure to Nifty derivatives as on Feb 28, 2009. DSP Blackrock increased Nifty derivative exposure from Rs 293.83 in five schemes in March ’08 to Rs 611 crore in six schemes in February 2009. On the other hand, ICICI Prudential AMC raised Nifty derivative exposure from Rs 1003 crore in five schemes in March 08 to Rs 1048.86 crore in nine schemes in February 2009. Gradually unwind and then move to individual stocks, identification, higher returns, buy Nifty, with the market, convert into individual stocks. It gives you a breathing space. “Rising exposure to Nifty derivatives is an outcome of the pressure to perform in sync with the market at a situation where there is comprehensive volatility in the market,” says a mutual fund expert with a leading wealth management set up. The performance pressure on the fund houses led to tactical changes in portfolio constitution in accordance with the market movement. As on Nov 28, 2008, the exposure to Nifty derivatives reached the maximum at Rs 2434 crore at a time when the Nifty gained more than 9 per cent from the all time low of 2524 recorded on October 27, 2008.
Says Sidharth Bhamre, fund manager, PMS and derivative analyst at Angel Broking, “Fund managers do have pressure to perform in these market conditions. In a bull market, when all goes smooth, taking risk in terms of going for momentum stock exposures works for many. But in a falling market, even with the market you don’t earn. And considering that now the Nifty available at a forward of P/E of 9, it makes more sense to take exposure to Nifty index rather than individual stocks from a valuation perspective.”

Source: http://economictimes.indiatimes.com/articleshow/4272050.cms?flstry=1

Shinsei MF plans to launch PSU Bond Fund

Shinsei Mutual Fund has filed offer document with Securities and Exchange Board of India (Sebi) to launch Shinsei PSU Bond Fund, an open ended income scheme. The face value of the new issue will be Rs 10 per unit.
Investment objective:

The investment objective of the scheme is to generate income commensurate with prudent risk while maintaining the optimal balance of yield, safety and liquidity from a portfolio constituted of debt securities and money market securities issued predominantly by public sector undertakings and nationalised banks.
Investment plans:

The Fund offers two plans viz. Savings and Investment Plan. Each plan will have retail and institutional plans with growth and dividend options. Dividend option will offer dividend payout and reinvestment facilities.
The minimum investment amount:
For Savings plan, the minimum investment amount under retail option Rs 10000 and in multiples of Re 1 thereafter and under institutional plan will be Rs 1 crore and in multiples of Re 1 thereafter.
For Investment plan, the minimum investment amount under retail option Rs 10000 and in multiples of Re 1 thereafter and under institutional plan will be Rs 50 lakh and in multiples of Re 1 thereafter.
Minimum targeted amount:

The scheme seeks to collect a minimum corpus of Rs 1 crore under each plan under scheme during NFO period of the respective plan under the scheme.
Asset allocation:
Savings Plan: The scheme will invest 80-100% in debt securities including government securities, securitised debt, and other securities issued by the public sector undertakings. It will invest up to 20% in debt securities including government securities, securitised debt, and other securities issued by other than public sector undertakings. Investment in money market securities shall be of maturity up to 1 year.
Investment Plan: The scheme will invest 75-100% in debt securities including government securities, securitised debt, and other securities issued by the public sector undertakings. It will invest up to 25% in debt securities including government securities, securitised debt, and other securities issued by other than public sector undertakings. Investment in money market securities shall be of maturity up to 1 year.
Investment in securitised debt under each plan will not exceed 20% of the net assets of that plan. The plans under the scheme will not invest in foreign securitised debt.
Load structure:
The scheme will not ask an entry load.
In Savings Plan, exit load will be 0.50% if redeemed within 3 months from the date of allotment while no exit load for institutional plan.
In Institutional Plan, exit load will be 1.00% if redeemed within 6 months from the date of allotment and 0.50% if redeemed after 6 months but within 1 year from the date of allotment. Exit load for institutional plan will be 0.25% if redeemed within 1 month from the date of allotment of units.
Benchmark Index:
The Savings Plan's performance will be benchmarked against Crisil Liquid Fund Index while Investment Plan will be benchmarked against Crisil Short Term Bond Fund Index.
Fund Manager:
Killol Pandya will be the fund manager for the scheme.

Source:http://apollosindhoori.com/Default.htm

The winning strategy

Morningstar said there are 18 funds in India short government category collectively managing about Rs2,000 crore and 40 funds in India intermediate/long government category managing approximately Rs4,200 crore

India short government

ICICI Prudential Asset Management Co. Ltd’s Gilt Treasury Plan has won Morningstar’s award for the best fund in the India short government category, beating 14 other contenders.

Morningstar said there are 18 funds in this category, which collectively manage about Rs2,000 crore. The rater defines short-government portfolios as those that have at least 90% of their bond holdings in bonds backed by the Indian government or by government-linked agencies. These portfolios have average effective maturities of up to three years. They are relatively less sensitive to interest rates, and thus have lower risk.On an average, this category had one-year returns of 10.02% and three-year annualized returns of 7.15%, relatively sedate compared with other debt fund categories. ICICI Prudential Gilt Treasury Plan had a one-year return of 20.65% and a three-year return of 11.25%.Rahul Goswami, co-head of fixed income at ICICI Prudential Mutual Fund, who manages the Rs1,000 crore (at the end of February) fund, spoke on how an active management of duration and liquidity makes this fund different from its peers. Edited excerpts:

What is your investment philosophy?

The underlying philosophy is to prudently manage downside risks. The fund seeks to limit volatility by deploying money in short-term gilts. The objective is to closely manage portfolio risks arising out of changes in the market rates by actively managing the duration of investment in the portfolio.

How did you manage the liquidity crisis in October-November?

That was a challenging phase for economies and companies globally as liquidity was tightening and credit crisis was deep. However, with RBI’s (Reserve Bank of India) prudent policies, the scenario has improved significantly. In fact, inflows into our debt funds have increased significantly since November.

How different is your fund from its peers?

Active management of duration, maturity and liquidity is the major advantage derived from this fund. For instance, when interest rates were high, the average portfolio was low. In the current scenario of downward interest rates, the maturities are relatively longer. The advantage of the fund lies in its successful portfolio management strategy.

What kind of investor should invest in your fund?

The risk-free gilt funds mainly invest in sovereign bonds that have outperformed in the current credit market. Such funds are an ideal investment option for investors who don’t have the appetite for high interest-rate volatility. With investors increasingly becoming risk-averse due to the current liquidity and credit scenario, gilt funds have become an attractive investments option for investors.

Is the best time for bonds over?

The major factors influencing interest rate direction are inflation, that is showing a sharp downward trend; lower growth in GDP (gross domestic product) and industrial production due to the global demand scenario; and an increasing trend in unemployment. Hence, risk appetite is also likely to remain low.

All these factors prompt central banks to follow counter-cyclical policies to be pro-growth and accommodative. The initiatives will thus continue towards providing high liquidity in the market and reducing interest rates. Some initiatives have already been taken, but the impact of the action is yet to be seen.

The downward trend will continue, but will be gradual due to the stress created by government borrowings and the fiscal scenario. Investing in bond funds with a three- to six-month view will help optimize returns.

long government

Canara Robeco Asset Management Co. Ltd’s Canara Robeco Gilt PGS has won Morningstar’s award for the best fund in the long-term government bond fund category, beating 28 contenders.

Morningstar said there are 40 funds in this category, which manage approximately Rs4,200 crore. It defines long/intermediate government portfolios as those that have at least 90% of holdings invested in bonds backed by the Indian government or by government-linked agencies. As these portfolios have average effective maturities greater than three years for intermediate grouping and seven years for long category, they are more sensitive to interest rates and thus riskier than portfolios that have shorter maturities.

The returns in this category match the high risks with such funds, fetching 26.38% on an average for a one-year investment. The Canara Robeco Gilt PGS offered a return of Rs135.17 on Rs100 invested in the beginning of the year.

Ritesh Jain, head of fixed income equities at Canara Robeco, who manages the Rs120 crore (at the end of February) fund, told how he capitalized on market volatility to fetch almost double the average return and how it’s suitable for investors with some risk appetite. Edited excerpts:

What is your investment philosophy?

In the current economic conditions and anticipation of shaping of markets, we believe that product life cycles are going to become smaller and volatility is going to take the centrestage in the coming year. With uncertainty on the macroeconomic front, as a starting point, we take profits off of the table and also maintain strict stoploss levels. The inherent volatility in the markets provides opportunities to make decent returns.

How did you tackle the liquidity crisis in October-November?

The mutual fund industry passed through really difficult times in October-November. Before this actually hit us, we had anticipated shortage of liquidity in the markets and envisaged short-term interest rates going up. We churned our portfolio and maintained a considerable proportion of our portfolio in liquid or overnight assets. This strategy actually turned out to be a blessing. Not only did we manage to honour our redemptions comfortably, but also managed to provide top returns in the same time period.

How different is your fund from others in its peer category?

The philosophy of our fund is that we would rather not chase AUMs (assets under management) aggressively if it comes at the cost of performance, and do what is best for the investors. Seeing the nature and performance of our debt markets, we believe that there is limited depth in our markets. In such a scenario, we thought that we would be able to do justice to our income fund and investors only up to a certain level and longevity of AUMs. So, we decided to cap the fund for further investments.

What kind of investor should invest in your fund?

Our fund is ideal for investors who have the appetite for volatility and seek to generate returns from the opportunities present in the markets. We believe that our fund should be able to deliver 300 basis points (one basis point is one-hundredth of a percentage point) over liquid returns to the investors with a time horizon of six months and above.

What is your outlook on the bond market?

With uncertainty in economic and fiscal environment around, we believe that volatility is going to be the order of the day. We might not see a considerable secular downward movement in the yields, but would probably see a range bound market with lots of volatility, within which investors would have opportunities to earn decent returns. We anticipate that the market would behave in this manner for some time to come and we could see pressure on yields towards last quarter of the calendar year 2009. The yield on the 10-year gilt could breach 7.50%.

Source:http://www.livemint.com/2009/03/13220727/The-winning-strategy.html

183 mutual fund schemes pending with SEBI

Change in guidelines, pending responses to queries from the Securities and Exchange Board of India (SEBI) and adverse market conditions have delayed the launch of total 183 mutual fund schemes, reports Business Standard. Out of the 183 schemes 68 schemes of the fixed maturity plans (FMPs) category have been shelved because of a change in guidelines in the third quarter of 2008-09. Of the remaining schemes, SEBI still has to approve around 70-75 schemes, despite their offer documents being filed since April 2008.
SEBI has said that a large number of applications were sent back with queries, but the fund houses did not come back with a response. But certain fund houses alleged that the market regulator has not approved their schemes within the stipulated period of 21 days from the date of filing the offer document and that some of these offer documents were filed up to 11 months back.
Since April 2008, about 290 offer documents were filed with SEBI, which charges a fee of Rs 100,000 for filing an offer document. However, if the fund house does not launch the fund within a six-month period of getting the approval, the application lapses. The fund house is then required to file a fresh offer document.

Source: http://www.myiris.com/newsCentre/newsPopup.php?fileR=20090316124838196&dir=2009/03/16&secID=livenews

Over 180 MF schemes delayed

Depressed markets, Sebi queries, change in guidelines halt launches.

The launch of 183 mutual fund schemes has been delayed due to adverse market conditions, pending responses to queries from the Securities and Exchange Board of India (Sebi) and a change in guidelines.
Out of these, 68 schemes were fixed maturity plans (FMPs) that had to be shelved because of a change in guidelines in the third quarter of 2008-09. Of the remaining 115, Sebi is yet to approve around 70-75 schemes, despite their offer documents being filed since April 2008, according to an industry source.
“A large number of these applications came in the July-October 2008 period. And when we sent them back with queries, the fund houses did not respond,” a Sebi official said.
During October, the Bombay Stock Exchange Sensitive Index, or Sensex, fell to a low of 7,700. Since then, there has been some recovery. But markets continue to languish. It's no wonder that fund houses have deferred launches, despite approvals being given to around 40-45 schemes.
“Fund houses were not too keen on launching new schemes in such a market. In equities, especially, there was absolutely no interest,” AP Kurian, chairman, Association of Mutual Funds in India (Amfi), said.
However, some fund houses claimed that the market regulator had not approved their schemes within the stipulated period of 21 days from the date of filing the offer document. Some of these offer documents were filed up to 11 months back.
“We have filed offer documents for eight schemes since April and have not received approval from Sebi so far, despite responding regularly to queries,” the chief investment officer of an international fund house said.
Since April 2008, about 290 offer documents were filed with Sebi, according to Delhi-based mutual fund tracker Value Research. A fund house pays a fee of Rs 1 lakh for filing an offer document. However, if the fund house does not launch the fund within a six-month period of getting the approval, the application lapses. The fund house is then required to file a fresh offer document.
“Even the more recent new fund offerings have managed to garner only minimal amounts due to low investor appetite. But debt funds are getting inflows into their fixed income and liquid schemes,” added Kurian.
Sebi not comfortable with structured products
Sebi has expressed its discomfiture with schemes that are based on equity-linked debentures (ELD) and constant proportion portfolio insurance (CPPI).
“These products were too complex for the lay investor. With the continued downturn in the equity markets, and ratings of ELD issuers too moving into negative zone, the products carry a risk of default. We would not favour the launch of such schemes at the moment,” a Sebi official said.
This sentiment was confirmed by Amfi chairman A P Kurian, “Sebi consciously does not approve a fund if it is too complicated for Indian investors.”
Currently, there are three ELD-based schemes that have collected Rs 1,516 crore. Four ELD based schemes — UTI Equity Linked FMP Series I, Tata Equity Linked FMP, Birla Equity Linked FMP Series 1M and HSBC Equity Linked FTP — have not yet received Sebi’s approval.
ELDs are floating rate debt instruments whose coupon (interest) is based on the return of the underlying equity index, like the Nifty. However, if the issuer of ELD defaults, the investor bears the risk of losing a part of the principal.
There are no CPPI-based products for retail investors. Fund managers, however, feel that the market regulator should allow them to launch complex products targeted towards high net worth individuals.

Source: http://www.business-standard.com/india/news/over-180-mf-schemes-delayed/351813/

JM Healthcare Sector Fund changes its fundamental attributes

JM Mutual Fund has approved the change in fundamental attributes of the JM Healthcare Sector Fund and its conversion from an open ended sector scheme to an open ended equity scheme vide their respective resolution dated 5 March 2009. The change in fundamental attributes include change in name, investment objective, investment strategy, benchmark index, asset allocation pattern and other related matters. The proposed changes will be effective from 16 April 2009.
Proposed Changes
Name of the scheme: JM Large Cap Fund.
Investment objective: The investment objective of the scheme will be to generate by predominantly investing in large cap companies which would be top 100 companies on the National Stock Exchange of India in terms of market capitalization.
Asset Allocation: Under normal circumstances the scheme will invest upto 65%-100% in equity and equity related instruments with high risk profile and upto 35% in the money market instruments/ debt securities with low to medium risk profile.
Investment Strategy: JM Large Cap Fund will invest in the top 100 companies on the National Stock Exchange of India based on market capitalization. Being a growth oriented scheme, the scheme seeks to invest a substantial portion of its portfolio in equity and equity related instruments. Under normal circumstances, around 65% of the corpus shall be deployed in such securities and the balance in debt/money market instruments. However, whenever the valuations of securities rise in a sharp manner, the scheme will take advantage of trading opportunities presented and in such a scenario, the fund will have a high turnover rate. The scheme will seek to use a mix of top down and a bottom up approach.
Benchmark index: S&P CNX nifty Index
Fund Manger: The scheme would be managed by Sanjay Chhabaria
The investors of JM Healthcare Sector Fund, who do not agree to the above proposal, can exercise the exit option without any exit load from 16 March 2009 to 15 April 2009 (both days inclusive but upto 3.00 p.m on the last date of the exit option).

Source: http://apollosindhoori.com/Default.htm

JM Healthcare Sector Fund changes its fundamental attributes

JM Mutual Fund has approved the change in fundamental attributes of the JM Healthcare Sector Fund and its conversion from an open ended sector scheme to an open ended equity scheme vide their respective resolution dated 5 March 2009. The change in fundamental attributes include change in name, investment objective, investment strategy, benchmark index, asset allocation pattern and other related matters. The proposed changes will be effective from 16 April 2009.
Proposed Changes
Name of the scheme: JM Large Cap Fund.
Investment objective: The investment objective of the scheme will be to generate by predominantly investing in large cap companies which would be top 100 companies on the National Stock Exchange of India in terms of market capitalization.
Asset Allocation: Under normal circumstances the scheme will invest upto 65%-100% in equity and equity related instruments with high risk profile and upto 35% in the money market instruments/ debt securities with low to medium risk profile.
Investment Strategy: JM Large Cap Fund will invest in the top 100 companies on the National Stock Exchange of India based on market capitalization. Being a growth oriented scheme, the scheme seeks to invest a substantial portion of its portfolio in equity and equity related instruments. Under normal circumstances, around 65% of the corpus shall be deployed in such securities and the balance in debt/money market instruments. However, whenever the valuations of securities rise in a sharp manner, the scheme will take advantage of trading opportunities presented and in such a scenario, the fund will have a high turnover rate. The scheme will seek to use a mix of top down and a bottom up approach.
Benchmark index: S&P CNX nifty Index
Fund Manger: The scheme would be managed by Sanjay Chhabaria
The investors of JM Healthcare Sector Fund, who do not agree to the above proposal, can exercise the exit option without any exit load from 16 March 2009 to 15 April 2009 (both days inclusive but upto 3.00 p.m on the last date of the exit option).

Source: http://apollosindhoori.com/Default.htm

We see mkt beginning to recover by end 2009:Waqar Naqvi,Taurus MF

Waqar Naqvi, is CEO of Taurus Mutual Fund, where he is in charge of running day to day business of the organisation and leading the team of functional heads. 

He has close to 17 years of experience in investment, finance and mutual fund industry, his extensive career spans across all facets of financial services especially all functions of asset finance and asset management. Employers in his resume include Thermax, Apple Finance, Escorts Finance and GE TFS. In his last assignment before he joined Taurus Mutual Fund, Naqvi was Business Head, Portfolio Management Services and Offshore / International Business at Birla Sun Life AMC.

Naqvi an ICWA from the 1991 batch, and an MBA specialized in Finance and Marketing

Here are some excerpts from an exclusive interview with Waqar Naqvi.

Give us an idea about the investment philosophy of Taurus MF?

We believe that when we are buying stocks we are buying businesses and our analysis and research also looks at it the same way. We use both the top down and bottom up approach. We look at stocks which can give appreciation in the medium to long term and which are sound businesses. 

Tell us about the structure of your research team?

We have at this point in time, three fund managers on the equity side, one fund manager for fixed income, two dealers and 5 research personnel. The Equity side reports into the Head of Equity Investments and the Fixed Income side reports into the Fund Manager Fixed Income. 

What do you look for in a stock before taking a buy call? 

We believe in picking stocks which are in line with the objective of the offer document, have a sustainable story and whose growth prospects are good. We also pay attention to the cash and receivables position of the prospective company whose stock we may buy into and the credibility of the management.

Give us your outlook for the market for 2009?

With one more repo cut and reverse repo rate cut behind us now, we feel that the interest rates may decline in the short term, the inflation will correspondingly come down some more, given also the fall in the crude oil prices. However very low interest rates may not be sustainable for a growing economy like India and with the base effect gone we might see a rise in inflation with inflation climbing back to approx 6% levels by early 2010. The downside to the markets, in our opinion is now extremely limited, the stability in businesses should start becoming visible by the last quarter of calendar year 2009, which would have seen two bad quarters (March end and June end) and one mediocre quarter (Sept end). We see the market beginning to recover by end 2009, although a real bull rally would still be some distance away by then.

Are you building a defensive portfolio to safeguard investor value in the current volatile markets? 

We have already built a defensive portfolio and this has seen our Taurus Tax Shield out performing its peers consistently. Taurus Bonanza (our large cap fund) and Taurus Starshare (our multicap fund) have also done exceedingly well. We have had a component of approx 25% to 29% cash in our portfolios over the past couple of months, apart from a large share in defensive stocks.

What made you launch Taurus Ethical Fund, which is based upon the Shariah investment principals? 

It is a socially responsible fund. Shariah Compliance is just one part of it. We feel, people coming from all walks of life, geographically, regionally, linguistically, socially r otherwise have similar values and follow them in spirit. This fund just defines them in a more focused manner. We also feel there will be interest in places outside India in this fund and there was a space for this fund which is line with our philosophy of launching funds which are considered as good ideas by our think tank.

According to you, has the slow down in corporate earnings been sufficiently built into the prices as of now?

More or less, yes. Unless there are some rude surprises, we feel it has been factored in.

In 2008 mutual fund industry went through a lot of pain, what`s your outlook for the industry in 2009?

2008 was a double whammy with stock market tumbling and an unprecedented liquidity crunch at the same time. We see the liquidity has been improving since January 2009 and should keep on improving from April onwards further. Factors which need to be watched out for are the Government borrowing programme. The industry should fare better in 2009 compared to 2008, although the growth may be flat or only marginally up in 2009. Yet the pain points of 2008 would not be there.

Source:http://www.myiris.com/mutual/news/interArt.php?file=20090313144757196&secID=mftalkiris&secTitle=Talking%20to%20IRIS&dir=2009/03/13/20090313144757196.htm