Benchmark MF files offer document for Infrastructure fund

Benchmark Mutual Fund has filed an offer document with Securities and Exchange Board of India (SEBI) to launch Infrastructure Benchmark Exchange Traded Scheme (Infra BeES), an open-ended, exchange listed, index scheme tracking CNX Infrastructure Index.

The new fund offer (NFO) price for the scheme is Rs 10 per unit.

Investment objective:The investment objective of the scheme is to provide returns that, before expenses, closely correspond to the total returns of the securities as represented by the CNX Infrastructure Index. However, the performance of scheme may differ from that of the underlying index due to tracking error.

Option:The scheme offers only growth option.

Asset allocation:The scheme will invest 90-100% in securities covered by the CNX Infrastructure Index and 0-10% in money market instruments, g-secs, bonds, debentures and cash at call. As the CNX Infrastructure Index is an Equity Index, the constituents of the Index do not include debt securities. Cash at call includes cash component of the portfolio deposit received for subscription and payable on redemptions, dividend received by the Scheme which is pending deployment, etc. For the time duration of change in the index constituents, the scheme may have to invest in derivatives to maintain the respective weightage for the companies, constituting the index. These investments would be for a short period of time. The notional exposure of the scheme in derivative instruments shall be restricted to 10% of the net assets of the scheme.

Load structure:The scheme will charge neither entry nor exit load.

Minimum investment amount:Investors can invest under the scheme with a minimum investment amount of Rs 10,000 and in multiples of Re 1 thereafter.

Minimum target amount:The scheme seeks to collect a minimum target amount of Rs 10 million during the NFO period.

Benchmark index:The scheme`s performance will be benchmarked against CNX Infrastructure Index.

Fund manager:Vishal Jain will be the fund manager for Infrastructure Benchmark Exchange Traded scheme.

Source:http://www.myiris.com/newsCentre/storyShow.php?fileR=20090814121344707&dir=2009/08/14&secID=livenews

Retirement schemes face tax on withdrawals

The draft Direct Taxes Code, released by the government on Wednesday, proposes to tax all
withdrawals from retirement schemes, but raises the exemption limit on savings to Rs 3 lakh from the present Rs 1 lakh.
However, contributions to short term investment schemes including insurance, mutual funds and fixed deposits will no longer get exemption if the code is accepted by the Parliament.
Under the existing norms, investments in certain instruments like public provident fund, employees provident fund and government provident fund are not taxable at all the three stages — at the time of investments, the amount is deducted from your taxable income, during the period of investment when interest accrues it is not taxed and at the time of withdrawal too no tax is payable.
This is what in tax jargon is called the exempt-exempt-exempt (EEE) treatment, which will now change to EET, meaning the last stage will be taxed.
There is an important caveat here. The tax exempt status currently available to withdrawals would continue to apply to amounts accumulated in post-retirement savings schemes like PPF and EPF up to March 31, 2011. In other words, only money that accrues after that date will be taxed on withdrawal.
For instance, if your PPF account has a balance of say Rs 10 lakh on March 31, 2011 and that grows to say Rs 25 lakh a few years, later thanks to your contributions and the interest adding up. When you withdraw this Rs 25 lakh, you will pay tax only on the Rs 15 lakh that has accumulated from April 2011.
This change in the treatment of savings means that post-retirement annuity schemes would become very attractive, since they do not involve lump-sum withdrawals after retirement.
The EET mode of taxation, the code said, would encourage long term savings by the people. All post-retirement savings, the code stipulates, would have to be in specified retirement accounts held with permitted savings intermediaries who would have to be approved by the Pension Fund Regulatory and Development Authority (PFRDA). On the face of it, this seems to pose a serious challenge for insurance firms.

Source: http://timesofindia.indiatimes.com/news/business/india-business/Retirement-schemes-face-tax-on-withdrawals/articleshow/4887482.cms

Mutual Fund assets may grow 29% annually in next 5 yrs

The country's burgeoning mutual fund industry is expected to see its assets growing by 29 per cent annually in the next five years, with high household savings rate and low retail penetration attracting foreign asset managers, a report has said.

"The total assets under management in the Indian mutual funds industry are estimated to grow at a compounded annual growth rate (CAGR) of 29 per cent in the next five years," the report by global consultancy Celent said.
The pace of the growth in assets is expected to be higher in the years ahead as compared to the CAGR of 25 per cent witnessed in 2004-2009 period.
"A very high household savings rate and low retail penetration make the market a target for foreign asset managers," the report added.
However, the profitability of the industry is expected to remain at its present level mainly due to increasing cost incurred to develop distribution channels and falling margins due to greater competition among fund houses, it said.
Celent estimates the retail segment, which at present contributes just 37 per cent of the assets, to grow at a 35 per cent compounded annual growth rate for the next five years, driven by rise in income and awareness of MF products.
Meanwhile, institutional investors dominate the market with contributions of 56 per cent in assets.

Source: http://www.business-standard.com/india/news/mutual-fund-assets-may-grow-29-annually-in-next-5-yrs/70735/on

IRDA to increase lock-in period for Ulips

To check mis-selling, the Insurance Regulatory and Development Authority (IRDA) is planning to increase the lock-in period for unit-linked insurance plans (Ulips) from three to five years. R Kannan, IRDA member said, "This move may reduce the problem of policyholders letting covers lapse and also benefit companies as it would help them minimize their administrative and marketing costs. We are waiting for a consensus on the issue."
A senior executive at a large private sector insurance company said that the minimum tenure for a Ulip was five years at present, but partial withdrawals were allowed after three years. If the intent is to allow partial withdrawals only after five years, then it is good since insurance is a long-tenure product.
In recent months, IRDA tried to tighten regulations on Ulips. First, it put in place systems to ensure that policies were not front - loaded in terms of premium payment. Last month, it also reduced the charges levied on Ulips, though the circular was expected to be modified to factor in industry concerns.
On the current move, G N Agarwal, Chief Actuary, Future Generali said, "The move would benefit the mutual fund industry as the interest of Ulip buyers might be affected since they have to wait for five years before they could exit."

Source: http://www.siliconindia.com/shownews/IRDA_to_increase_lockin_period_for_Ulips_-nid-60336.html

Reliance MF considering IPO, scouts for global acquisitions

India's largest mutual fund may also be the first to go public. Sundeep Sikka, CEO, Reliance Mutual Fund, says the company is considering an initial public offering. "I think we are well capitalized at this point of time, but we are open for an IPO also. We are open and it is on the white board only."
According to him, Reliance MF is looking to expand through global acquisitions. "As far as global ambitions are concerned, yes we are. We are already present in Singapore, Malaysia, Dubai and we have a subsidiary in UK. As far as acquisitions are concerned, we are open for it as along as anything is coming at the right price."
As per the company's website, Reliance Mutual Fund is a part of the Reliance - Anil Dhirubhai Ambani Group. RMF offers investors a well-rounded portfolio of products to meet varying investor requirements and has presence in 118 cities across the country. "Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management Limited., a subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up capital of RCAM, the balance paid up capital being held by minority shareholders."
Reliance Mutual Fund (RMF) has Average Assets Under Management (AAUM) of Rs 1,08,334.38 crore and an investor base of over 74.63 lakh. (AAUM and investor count as on July 31, 2009).
Reliance Capital has interests in asset management, life and general insurance, private equity and proprietary investments, stock broking and other financial services.

Source: http://www.moneycontrol.com/india/news/business/reliance-mf-considering-ipo-scouts-for-global-acquisitions/411039

Mutual funds may roll back exit load rates after Sebi ruling

A number of mutual fund (MF) companies are gearing up to roll back recent hikes in exit load after capital market regulator Securities and Exchange Board of India (Sebi) said last week that they could not have different exit loads for different classes of investors under the same scheme.
An exit load is a fee collected at the time an investor withdraws money from a fund.

Level-playing field: Sebi’s rule will benefit retail investors as they would be treated on a par with institutional investors. Earlier, investors of over Rs5 crore did not pay any exit load, while big-ticket investors could bargain for lower exit loads. Small investors usually ended up paying the highest rates to exit a scheme. Abhijit Bhatlekar / Mint
At least four MF firms told Mint they were working on ways to protect the interest of institutional investors, most of whom did not pay exit loads earlier.
The MF houses are required in the next few days to announce a new structure with lower, uniform rates for all schemes.
Before Sebi’s latest rule, investors of over Rs5 crore did not have to pay any exit load, while big-ticket investors who invested less than Rs5 crore could bargain for lower exit loads. Small investors thus usually ended up paying the highest rates to exit a scheme.
Now, while some MF companies are looking to reduce the lock-in period, others are planning to reduce the percentage rates of exit loads.
An official at SBI Funds Management Pvt. Ltd, which manages Rs34,158 crore, said: “We have to roll back and make it equal for all. We will continue to focus on long-term assets and will try to prevent exits before three years. For this, we may not reduce the lock-in period.”
He added that some MF firms might also launch separate institutional plans to protect the interest of corporate entities and high networth individuals. “We are waiting for internal approvals and will come up with the new structure in a few days,” he said on condition of anonymity.
Following a Sebi ban on entry loads effective 1 August, many MF houses rushed to raise the span for which exit load became applicable to one-three years, from the earlier six months to one year. An entry load is initial charges collected by an MF company, which are not refundable
This expanded the scope of premature withdrawals, allowing MF companies to charge exit loads and offset losses from the ban on entry loads. Until now, these firms typically charged up to 1% exit load for retail investors for premature redemption.
“We had raised the period to three years on all our schemes. Now we are discussing ways to get in line with this latest Sebi directive,” said the chief executive officer (CEO) of a mid-sized fund house, who did not want to be named.
“We have two options: one is to charge the same load for everyone or reduce the load applicability to a lower period. We will take a decision in a couple of days,” he added.
Sebi’s new rule to have uniform exit loads will also likely upset MF houses’ cash flow calculations, as incentive structures for distributors are finalized after factoring in the load rates. In this case, they would have had used the new, higher exit rates to determine the incentives.
“The move is helpful for the retail investors. We are working on new exit load structures for various schemes and will inform all investors in the next few days,” said Nimesh Shah, managing director of ICICI Prudential Asset Management Ltd.
According to Dhirendra Kumar, CEO of Value Research India Private Ltd, a New Delhi-based MF tracking company, Sebi’s ruling will have three consequences. First, some fund houses will launch new schemes for institutional investors with higher minimum investments. Secondly, some companies will reduce the existing load structure. Thirdly, some companies may roll back the current lock-in period of three years.
“The move will act as a dampener for the large investors. Fund houses will have to strike a balance and work on ways to protect the interest of big-ticket investors,” he said.
But fund houses are caught between a rock and a hard place, say industry experts.
“If MFs reduce the exit load, all classes of investors would start churning (prematurely exiting) frequently. And, if they increase the exit load for institutional investors, their participation would go down,” said Rajeev Deep Bajaj, managing director of New Delhi-based fund distributor Bajaj Capital Ltd.
“Although this will give confidence to the retail investors as they would be treated on a par with institutional investors, fund houses will be under pressure,” he added.
According to industry lobby group Association of Mutual Funds in India, equity schemes contribute about 25% of the Rs6.97 trillion industry. According to Value Research, 30-40% of this comes from institutional investors.
“It is an advantage to the retail investors. We are in the process of rationalizing the existing exit load structure for all,” said Sundeep Sikka, CEO of Reliance Capital Asset Management Ltd, adding that since institutional participation in his firm’s equity-oriented schemes is not much, Sebi’s rule will likely not have a big impact.

Source: http://www.livemint.com/2009/08/11214859/Mutual-funds-may-roll-back-exi.html

Postal cover funds set for stock-market delivery

Come October and the life insurance division of the postal department will start investing its premium collections in revenue-generating instruments including stocks, a government official said.
Postal Life Insurance will follow the investment norms set by the Insurance Regulatory and Development Authority (Irda) from October 1 to ensure maximum return for investors through a systematic and well-charted investment policy, said the official, requesting anonymity. At present, the department's collections are transferred to a special deposit scheme on which it earns a secure interest of 8% from the government.
As per the plan, the department can invest a maximum of 15% of its daily net collections, averaging Rs 6-8 crore, into equity schemes. The balance 85% will go into secured instruments with at least 50% of the sum invested in government securities and a minimum 15% in infrastructure bonds, said the official requesting anonymity. Postal Life Insurance makes an annual net collection of Rs 2,000-2 ,500 crore.
Net collection is the revenue generated in the form of premium minus costs like interest payment and maturity claims. The department will hire professional asset managers for deployment of its premium kitty in financial instruments. It has zeroed in on SBI Mutual Fund and UTI AMC as fund managers, the official said. They will be paid on a commission basis.
Once the new scheme is kick-started, the department may see equity investments equal to 15% of its average daily collections, the official said. The department will have its investment division in Mumbai. The funds for setting the office is being raised from within, the official further said.
"By and large, the equity investments will be done on a day-to-day basis, with exceptions on days when the quantum of the net collection is very less," the official said.

Source: http://economictimes.indiatimes.com/Market-News/Postal-cover-funds-set-for-stock-mkt/articleshow/4884257.cms

Birla Sun Life files paper for India Reforms Fund

Birla Sun Life Mutual Fund has filed an offer document with Securities and Exchange Board of India (SEBI) to launch Birla Sun Life India Reforms Fund, an open ended equity scheme. The new fund offer (NFO) price for the scheme is Rs 10 per unit.

Investment objective:The primary investment objective of the scheme is to seek to generate growth and capital appreciation by building a portfolio of companies that are expected to benefit from the economic reforms, PSU divestment and increased government spending.

Plans:The scheme shall offer dividend and growth plan. Dividend plan shall have payout and reinvestment option. Default plan/option will be dividend plan/ dividend reinvestment option.
Asset allocation: The scheme will invest 65-100% in equities and equities related instruments. The scheme will invest 0-35% in debt and money market instruments (including securitized debt).

Load structure:The scheme will not charge any entry load. For purchase / switch in of units below Rs. 50 million in value, an exit load of 1% is payable if the units are redeemed / switched out within 3 years from the date of allotment. For purchase / switch in of units, equal to or greater than 50 million in value, no exit load is payable.

Minimum application amount:The minimum application amount for the scheme will be Rs. 5,000/- & in multiples of Re 1/- thereafter during the new fund offer period. Minimum additional application amount is Rs 1,000/- and in multiples of Re 1/- thereafter during the new fund offer period. Target amount to be raised is Rs 10 million.

Benchmark Index:The scheme`s performance will be benchmarked against S&P CNX 500.
Fund manager:Ankit Sancheti will act as the fund manager of the scheme.

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