SEBI heat forces funds to revive PMS

Portfolio management service (PMS), a business that was largely ignored by many asset management companies (AMCs), is back on their radar. While many fund houses, which already have PMS arms, are looking to revive this business, new entrants in the mutual fund industry such as Canara Robeco, Shinsei Asset Management and Axis Asset Management are gearing up to start this service meant for wealthy clients.

The reason for enthusiasm among fund houses to revive or launch these specialised fund management services goes beyond just providing exclusive services to clients, said industry officials and distributors. These moves find their roots in the recent SEBI clamp-down on distributor commissions from August, which resulted in the reluctance to sell equity schemes, causing a significant dip in asset growth. Some large fund houses have found that PMS is a better tool to keep distributors in good humour, as it is largely free from the market regulator’s purview. And smaller players in the industry have been quick to follow suit.

“The industry is seeing the PMS route as a way to remunerate distributors nowadays, as there is lot of scope for better pricing here,” said a top official of a private fund house, which is believed to run the largest PMS business among mutual funds. PMS providers are not required to disclose their assets or returns from schemes, unlike mutual funds schemes.

Mutual funds are asking distributors to push their PMS products that have a potential to earn them a higher commission. Despite being a low-volume business, distributors are not complaining as they have been deprived of commissions from selling mutual fund schemes since August after SEBI banned fund houses from charging an entry load from investors.

Officials of the new mutual funds, which are likely to start this service soon, do not agree with the contention that the PMS business is being launched to remunerate distributors.

“The intention to launch PMS is not only to have a free hand in fixing fees and remunerating distributors, but to mainly provide our specialised expertise in fund management to our clients,” said Avinash Ramnath, national sales-head, Canara Robeco Asset Management.

“The intention to launch PMS is part of our plan to service offshore mandates and have an advisory business... A free hand in distributor fees is not our intention to launch it,” said Sethuram Iyer, CIO, Shinsei Asset Management. Officials of Axis Asset Management could not be reached.

Source: http://economictimes.indiatimes.com/SEBI-heat-forces-funds-to-revive-PMS/articleshow/5316984.cms

MF trading's now a lot easier & cheaper

With the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) offering a platform for buying and selling mutual funds, investors across the length and breadth of the country would now be able to buy and sell units of MFs registered with bourses for this facility, without having to locate a distributor.

Existing mutual fund investors who intend to buy more units will also benefit as this system will allow them to keep track of all investments under a single statement. Moreover, buying and selling will become more efficient and transparent , particularly if investors choose to transact through a demat account.

How does the new system fare on a cost-benefit analysis?
For those who purchase MF units directly through the AMCs’ websites, opting this route will result in an increase in cost, as they will have to shell out the brokerage as well as demat fees. “Entry load has been eliminated in mutual funds. Someone using the online brokerage portal, though, will be charged by the trading company. While the average brokerage in such transactions could be around 0.5%, the DP could levy an account opening charge of around Rs 250-300 , in addition to an annual maintenance charge of around Rs 400,” says Anil Rego of financial planning firm Right Horizons. The brokerage and demat transaction fee could vary as per the broking firm, depository and the DP, respectively . This apart, while trading equity MFs through exchanges, you will have to shell out securities transaction tax (STT) as well.

Though cost seems to be a factor for those who do not have a demat account, the impact will be minimal for those who already are demat account holders. “If an investor decides to open a demat account only for investing in MF units, then his/her cost could increase. However, this will not be the case for those who use their existing demat account for trading in equity shares,” points out Vineet Arora , head of product and distribution, ICICI Direct.

TRADE SMART
A FOUR-STEP GUIDE TO PURCHASE OF MUTUAL FUNDS THROUGH STOCK EXCHANGES
STEP: 1 GETTING STARTED
OPEN A DEMAT account with a depository participant, who operates as an agent of the two depositories in the country — National Securities Depository (NSDL) and Central Depository Services (CDSL). You would also need to open a trading account with an eligible stock broker (who is registered with the association of mutual funds — AMFI). The know-your-customer (KYC) procedure will be conducted by the depository participant while opening the demat account.
STEP: 2 TRADING
FOR BUYING/redeeming MF units, like in case of stocks, you will have to send the instruction to your broker, who will, in turn, place the order on the terminal on your behalf, after collecting the money and brokerage from you. During redemption, however, the proceeds are directly credited to your account by the mutual fund.
STEP: 3 SETTLEMENT
WHILE PURCHASING units, the transactions are settled on a T+1 basis. Redemptions are done on a T+3 basis for equity MFs and T+1 for debt MFs. Transactions, however, cannot be initiated after trading hours, as NSE terminals shut at 3 pm, says UTI AMC chief marketing officer Jaideep Bhattacharya. Under the existing system, you can go to your distributor or the mutual fund after 3 pm, but it’s the next business day’s NAV that will be taken into account.
STEP: 4 KEEPING TRACK
IN TERMS of convenience, the advantages are similar to investing online through the AMC’s website — reducing the clutter of paperwork and speedy execution. However, here, the holding report, which is submitted by the DP (and not the AMC, unlike the existing format) will provide a snapshot of the stocks as well as the MF units that you own, presenting a more holistic picture of your total investments.

WHAT’S GOOD
MF schemes can be purchased anywhere in India Depository statement gives you holistic picture of your MF investments Lesser paperwork Speedy execution

WHAT’S NOT
Costlier for those who are not already demat accountholders Settlement cycles are same as existing Transactions only during exchange trading hours Not all MF schemes available at present

Source: http://economictimes.indiatimes.com/articleshow/5308887.cms?flstry=1

MF Watch: IDFC Premier Equity Fund

IDFC Premier Equity Fund: An Open Ended Equity Fund

Fund Manager: Kenneth Andrade

The scheme aims at capital appreciation by investing in diversified small and medium size businesses with good long term potential available at cheap valuation.

Portfolio Analysis: IDFC premier fund seeks to invest in mid sized companies with growth potential over a longer term. The fund thus holds a diversified basket of mid and small cap stocks off which some qualify for growth stocks. Notably, its compact portfolio of little over 30 stocks seems well diversified and its buy and hold strategy, augurs well for the investor.

The scheme has significant exposure in consumer non-durables with over 26 per cent exposure followed by transportation and logistics sector stocks. Notably, the highest exposure into this (consumer non-durables) space has been for more than a year.

However, some stocks in this segment namely, Gokul Refoils, Raj Oil Mills and Globus Spirits appear unlikely to outperform in the foreseeable future.

There is high exposure to auto ancillaries and finance stocks and the aggregate of the top 4 sectors is 53 per cent of the portfolio value upto October 2009.

Over the last three years, the funds has outperformed its peers as well as the benchmark indices by generating over 25 per cent returns as compared to just 7.5 per cent returned by its Benchmark, BSE 500.

As the fund invests in companies that are emerging, it is automatically exposed to higher risks.

Investment Strategy Analysis: On the basis of its past performance it ranks amongst the better performing schemes as compared to its peers.

Risk Profile:

Standard Deviation: 10.03%

Beta: 0.90

Sharpe Ratio: NA

Outlook: Investors with high risk appetite can consider investing into this fund at declines.

Caveats: Higher risk in as the fund invests emerging businesses. Also the fund is known to periodically curtails inflows to ensure that it remains at a manageable size.

Source: http://www.bloombergutv.com/stock-market/mutual-funds-news/39342/mf-watch--idfc-premier-equity-fund.html

10-yr bond yield at highest since Nov 2008

India's benchmark 10-year bond yield breached 7.50 percent on Monday and rose to its highest level in 13 months as higher U.S. yields and scheduled debt sales this week weighed on sentiment.
At 9:05 a.m. (0335 GMT), the 10-year benchmark bond yield was at 7.54 percent, its highest since Nov. 18, 2008. It had closed at 7.48 percent on Friday.

Source: http://economictimes.indiatimes.com/10-yr-bond-yield-at-highest-since-Nov-2008/articleshow/5309861.cms

Rules of MF investment haven't changed

As most mutual fund investors would be aware of by now, it is now possible to invest in mutual funds through a stock broker. Actually, that’s not true quite yet, but the system has been put in place on NSE. Currently, it has been made functional only with UTI’s and Birla Sun Life’s funds, but more fund companies are expected to join rapidly.

Also, the broker through whom you are investing in funds must have people who have the required certification before they can do this business. Still, one can expect these things to get sorted out sooner rather than later. One reason why the exchange-based MF investments system has taken off so rapidly is that Sebi is pushing hard for it, perhaps because the fund industry has proven to be either incapable or unwilling to create a unified digital platform by itself.

Anyhow, investors will now find that they have a new channel through which they can invest in funds. However, investors should be clear about what the new sales channel is and what it isn’t. This is a new route through which to buy funds. It makes fund investing easier for investors in smaller cities. It also makes investing easier for those who already have a depository account and have had their KYC done.

From an industry perspective, it lowers costs and thus makes it economic for the investor’s costs to be lower. It also makes a new market addressable at a lower cost.

But let’s talk about what the new channel isn’t. It isn’t one through which investors should expect to receive investment advice. I’m sorry to say this but the culture of stock investing in India is one which would be lethal to sensible mutual fund investing. The world of a stock broker is one in which most clients hold investments for a few days and ‘long-term’ is perhaps a month or two. A friend of mine has already had a call from his broker’s office who has enthusiastically described the methodology that they will follow when the business takes off: They will analyse mutual funds’ declared portfolios to see which stocks are likely to go up and then they will ask clients to take ‘tactical positions’(his words) in the funds where they like the portfolio. This is a completely counter-productive way of investing in funds but one which, I guess, would come naturally to someone whose primary skill is supposed to be stock selection.

Effectively, this broker has figured out that basically, funds are a new type of trading instrument where he’ll get about 0.5% from the AMC rather than the pittance he gets as brokerage currently. Of course, this particular one didn’t even seem to be aware of the concept of exit loads, but I think it’s clear under the new system, at least some stock brokers are more likely to be part of the problem rather than part of any solution. The principles of equity fund investing remain the same — invest gradually, invest for the long run in funds with a good track record and invest mostly in diversified funds. Just because they are being sold through a stock exchange’s system doesn’t mean that mutual funds have suddenly become suitable for active buying or selling, even if newspapers say funds can now be traded on the stock exchange.

Source: http://economictimes.indiatimes.com/Rules-of-MF-investment-havent-changed/articleshow/5308893.cms

HSBC MF declares dividend for Midcap Equity Fund

HSBC Mutual Fund has approved De. 11, 2009 as the record date for declaration of dividend under dividend option of HSBC Midcap Equity Fund.

The face value of per unit is Rs 10.

The quantum of dividend will be Rs 1 per unit as on the record date.

HSBC Midcap Equity Fund is an open ended diversified equity scheme with the investment objective to generate long term capital growth from an actively managed portfolio of equity and equity related securities primarily being midcap stocks. However it could move a portion of its assets towards fixed income securities if the fund manager becomes negative on the Indian equity markets.

Source: http://www.myiris.com/newsCentre/storyShow.php?fileR=20091207131956707&dir=2009/12/07&secID=livenews

International funds lag domestic equity funds

If you wanted to make the best of the recent stock market rally, equity funds investing in domestic stocks have been a better bet than funds that invest overseas.

In the market fall last year, overseas funds contained losses better than domestic equity funds.

However, the tables have turned this year with a little over a third (seven out of 22) of the international funds managing to better the average returns of diversified equity funds.

If the more stringent S&P CNX 500 is taken as a benchmark, less than a fifth of international funds managed this act.

Domestic equity funds have returned 90.2 per cent over one year.

Rupee factor
The rupee appreciating over seven per cent against the dollar in the last one year affected the returns on all international funds relative to their India-focused peers.

Funds focused on other emerging markets such as China and other Asian countries or those that invested in a diversified basket of global stocks turned out to be the slow movers among the international funds.

These funds lost out as they invested in sectors such as telecom, consumer durables, semiconductors, and banks, which did not rally as much as ‘hot' themes such as commodities or natural resources.

Others betting on themes such as real-estate or investing in US bonds and treasuries also lost out. Funds such as Sundaram BNP Paribas Global Advantage and ING OptiMix Global Commodities that invest in mutual fund units of other global fund-houses such as Credit Suisse, First State and Martin Currie also underperformed.

Themes that clicked
The out-performers among international funds were the ones which either had a mixed mandate (with some allocation to India) or ones betting on gold or natural resources. Gold prices, which have rallied over 56 per cent over the last one year, have benefited funds investing in this commodity and the companies involved in mining it.

AIG World Gold and DSP BR World Gold, which gained 122.5 per cent and 96.7 per cent respectively for one year, in addition to investing in gold, also invest directly in stocks of mining companies such as Goldcorp, Newcrest Mining, Barrick Gold Corp benefiting from the rally in gold and the stocks.

Overseas funds managed by well-known global houses also did well with Templeton India Equity Income and Fidelity International Opportunities both delivering 120.1 per cent and 92.6 per cent respectively.

These funds have invested about 25-30 per cent of their portfolio in overseas equities and the rest in domestic markets. Apart from the Indian exposure, overseas exposure to mining stocks such as BHP Billiton and Rio Tinto as well as some gold mining stocks also played a key role.

ING Latin America Equity benefited from investing in stocks in countries such as Brazil, which benefited from both rally in oil prices (around 30 per cent in the last one year), and other commodities.

Mirae Asset Global Commodities Stock Fund has also benefited mainly by playing the same themes.

Source: http://www.thehindubusinessline.com/2009/12/07/stories/2009120752930100.htm

BSE launches fund transaction platform

The Bombay Stock Exchange (BSE), Asia's oldest bourse, launched its mutual fund trading platform on Friday, opening up more than 40,000 terminals in 400 cities.
The Securities and Exchange Board of India had last month permitted stock exchanges to offer their infrastructure for fund transactions, giving investors access to more than 200,000 terminals in over 1,500 Indian towns and cities.
More than 250 orders worth 84.4 million rupees were placed through the BSE fund transaction platform on Friday, Kalyan Bose, head of the exchange's corporate affairs, said. India's top 3 fund houses by assets, Reliance Capital Asset Management, HDFC Mutual Fund and ICICI Prudential Asset Management, were among those who made their funds available for transaction on first day, Bose said.
India's National Stock Exchange (NSE) started its own fund transaction platform on Monday.

Source: http://economictimes.indiatimes.com/markets/stocks/market-news/BSE-launches-fund-transaction-platform/articleshow/5301054.cms