UTI Mutual Fund declares dividend in 2 schemes

UTI Mutual Fund has declared a dividend of 15% (Rs 1.5 per unit on a face value of Rs 10), in UTI Equity Tax Savings Plan and UTI Transportation & Logistics Fund. The record date for dividend is December 29, 2009.

All unit holders registered under the dividend option of the schemes as on December 29, 2009 will be eligible for this dividend. The NAV of the schemes under dividend option as on December 24, 2009 was Rs 17.06 and Rs 15.28 respectively. (Check out - Recent MF Dividends)

UTI Equity Tax Savings Plan is an open ended ELSS scheme. The investment objective of the scheme is to invest the funds collected into equities, fully convertible debentures / bonds and warrants of companies, investment may also be made in issues of partly convertible debentures / bonds including those issued on rights basis subject to the condition that as far as possible the non-convertible portion of the debentures / bonds so acquired or subscribed shall be disinvested within a period of twelve months from their acquisition.


UTI Transportation & Logistics Fund is an open ended equity scheme. The objective of the scheme is to seek capital appreciation through investments in stocks of those companies engaged in transportation & logistics sector.

Source: http://www.moneycontrol.com/news/mf-news/uti-mutual-fund-declares-dividend2-schemes_432942.html

Realty mutual funds, investment trusts to open up new channels of funding

Initial public offerings (IPOs) in the near-term, real estate mutual funds (REMFs) and real estate investment trusts (REITs) in the medium-term are likely to emerge as new channels of real estate financing in the country. Property funds are also expected to enhance their activities in coming quarters.

The market capitalisation of country’s real estate firms, which equals to just 2.2% of the aggregate equity market capitalisation, far below than the 10-15% level found in advanced economies, is an indicator of the future potential, said Ramesh Nair, managing director (Chennai & Hyderabad), Jones Lang LaSalle Meghraj, a global realty consultancy firm.

According to estimates, the real estate sector will require an additional $3.66 billion to construct undertaken commercial projects and fulfil the unmet housing demand. While sources of funding have become scarce in the aftermath of the 2008 global financial crisis, there are some emerging channels, which are likely to help the sector continue its high-growth story.

With several real estate players having submitted red herring prospectus to the Sebi, a total of $3.31 billion is expected to be raised in coming months. Given that the Sebi has recently allowed anchor investors to participate in this fund-raising channel, IPOs can be an attractive vehicle to tap domestic as well as foreign institutional investment. Additionally, they provide a good exit option for most PE investors that have a short-term to medium-term investment horizon, Nair told FE.

According to a study on emerging trends in real estate finance carried out by Jones Lang LaSalle Meghraj, REMFs and REITs have played an important role in institutionalising real estate investment in many countries. The essential difference between them is that while investment made by REITs are only permitted in income-generating physical real estate assets, REMFs can take exposure in securities of real estate companies as well. Currently, both of these vehicles remain a future prospect in India.

As per Sebi regulations, REMFs in India have to invest in direct ownership of real estate (that accrues rentals and capital appreciation), mortgage-backed securities and securities of companies dealing in the development of real estate. However, a minimum of 35% of net assets have to be invested in direct ownership, leaving an upper limit of 65% on security exposure by REMFs, says the study.

According to the study, real estate developers HDIL, HDFC, ICICI, L&T and Unitech are some of the players that have expressed interest in launching REMFs. While issues related to valuation and taxation are currently holding back this emerging vehicle, the government is expected to clear these uncertainties soon. Similarly, regarding REITs, many policy issues are yet to be resolved, and authorities concerned have yet to come up with clear regulations.

The study says there are challenges that must be addressed in order to bring about a smooth improvement in the sources of funding. Establishing a nodal real estate regulator will be a welcome step in enhancing transparency and making the sector more organised. Clarifications pertaining to taxation and valuation issues for existing REMF and REIT guidelines will also be expected in the coming quarters.

Source: http://www.financialexpress.com/news/realty-mutual-funds-investment-trusts-to-open-up-new-channels-of-funding/561653/0

RBI puts banks on notice again over MF exposure

The Reserve Bank of India (RBI) has, for the second time in a fortnight, sought details from banks about their investments in mutual funds treasury officials at several banks said. The banking regulator has yet again made it clear in its communication that it is against banks handing over their surplus money to fund houses, officials told ET.

RBI’s concern stems from the fact that banks’ investments in mutual funds have risen even after it first made its displeasure known about these in the October mid-term policy review. This number rose by Rs 8,753 crore to Rs 1,69,236 crore in the month that ended on December 4, data from RBI show.

In the latest letter, the RBI has asked banks to give data on the average, lowest and the peak level exposure to mutual funds at various points of time. The regulator specifically sought data about their quarterly exposure since March 2009 and the third quarter (September to December) exposure to mutual funds, said treasury officials who requested they not be quoted.

The RBI also wants data on certificate of deposits (CD) issued by banks which are directly subscribed by mutual funds. CDs are money market instruments sold by banks to raise short-term funds. This money, too, is often routed back to mutual funds through investments in their liquid funds.

The regulator has also sought specific details about the money lent by mutual funds to banks through market repo or Collateralised Borrowing & Lending Obligations (CBLO) route. Both are markets where money is lent and borrowed on an overnight basis.

In mid-December, the RBI had officially asked banks about their aggregate exposure in mutual funds schemes and the steps that they have taken to curtail this figure although it was in the mid-term policy review in October 2009 that RBI governor D Subbarao had first expressed concern about banks parking surplus money in mutual funds.


In an interview to this newspaper, the governor had termed it as “circular trading”, saying the money was finding its way back to banks through route.

In a meeting with the RBI, bank CEOs had assured the regulator that they will set an internal limit, approved by the board, on such investments. It is estimated that banks account for one-third investments made in the liquid mutual fund scheme.

Meanwhile, select public sector banks have begun putting internal caps on such investments. Canara Bank has fixed a limit of Rs 6,000 crore or 10% of total investments while Oriental Bank of Commerce has fixed it at 10% of investments, top officials in the two banks said.

For Dena Bank and Indian Bank, the number stands at 5% of total investments. Officials with Bank of Baroda said they are considering linking the quantum of cap to total assets.

The RBI has often maintained that it is not comfortable with banks extending funds to corporates through intermediation of mutual funds. Banks charge anywhere between 7% to 10% to most highly-rated corporates on short-term loans while mutual funds subscribe to the short-term bonds at rates ranging from 5% to 7%.

As a result, corporates who are perceived as more creditworthy have begun raising money from mutual funds by selling debentures with a daily put and call option shunning banks in the process.

Source: http://economictimes.indiatimes.com/News/Economy/Finance/RBI-puts-banks-on-notice-again-over-MF-exposure/articleshow/5397769.cms?curpg=2

Shape of distribution market in years to come

Distribution will not die. It is an integral part of the handshake between consumers and product manufacturers.

This year will go down as one in which a fog of confusion enveloped consumers and distributors of financial products. While mutual fund agents feel as if the regulations are trying to kill their business, insurance agents are protesting reform that is yet to be announced.

Consumers are confused about what to pay, to whom and how much. I have been tracking this change fairly closely and have written frequently on it. Mails and comments on previous columns and off-line views tell me that there is much confusion out there on what the distribution market will look like once this second wave of financial sector reforms is over.

The first wave opened up the gates to financial products that an average Indian needs—mutual funds, insurance products, pensions, home loans—and they are all there in a largely usable form. The consumers are all there as well. But the conversion of demand to supply is not happening. Issues of trust, access and transaction ease are holding back the demand and supply from meeting.

If we read the spirit of the regulatory changes in 2009, the second wave of reform is aimed at clearing the way for easier, swifter and more transparent transactions. I’ll take a shot at what the financial product distribution will look like in 2015.

Distribution will not die. It is an integral part of the handshake between consumers and product manufacturers. And distribution will not be free. It cannot be. But the manner of the distribution, and its compensation, will change. From a largely low-value-add agency business, a structure that has compensation linked to the service provided will emerge. The biggest, in terms of numbers, will be the bank distribution network vending funds, insurance and pension products, at a small transaction cost to its customers. At the mass level for the financially included population, the banks will be the biggest beneficiaries of the regulatory changes we’ve seen so far. The banks have the trust, the distribution reach and the customers to most efficiently sell products across the country. In addition to the banks, there will be a few large retail distribution powerhouses, not unlike the Charles Schwab model of the US. Those that have the money to invest in technology and building a distribution chain will put in place a pure vending plus advisory service system. The key reason for this corporatization and streamlining will be economies of scale since one of the key costs will be technology and a centralized system driven by administrative needs.

The small agent, who today just collects signatures and forms and has neither the knowledge nor the intent to advise, will either become an employee of one of the large distribution powerhouses or upgrade his services to become a higher value-added financial advisor or planner. These will be boutique services by financial advisors and planners, and will be serviced by centralized administrative service providers like the platform that is already being put in place. There will be greater reliance on some form of certification to allow this market segment to distinguish itself from the pure vendors.

The third part will be the small (and in India, even small has many zeros) do-it-yourself population who will choose products and transact on their own. Most transactions will be online or through large clearing houses, such as stock exchanges. They will like the virtual comparison shopping and delivery modules and will be willing to pay a small transaction cost to avail of these services.

While this takes care of the financially included population (those who have a bank account), there is yet the issue of distribution to those outside the banking system. Expect mobile banking and the microfinance pipeline to transform this space. The banking regulator is already removing many roadblocks to mobile transactions and some microfinance initiatives are already moving beyond credit delivery. A uni-product distribution system is high-cost waste. Expect micro insurance, mutual funds, pensions all flowing through this pipeline in the times to come.

While some reform has got underway in 2009, there are still roadblocks to this world view. The direct stocks, mutual funds and pension pieces of the market are largely in place for this changeover to begin. What holds this process back is the blinker-wearing insurance regulatory system. The Indian insurance industry is a textbook case of regulatory capture by a small group of deep pockets. If this were not true, how would we have insurance products that are designed like investor traps? But 2010 should see some big-bang regulatory changes in insurance, with either the regulator finally understanding that it is not an industry association that they run in Hyderabad or change coming anyway to the industry.

2010 will be a year of much more change and uncertainty for the distribution industry. But some smart companies are already preparing for 2015 and putting in customer-friendly business models that aim at cutting cost, easing transaction efficiency and significantly enhancing transparency in financial products and services.

Source: http://www.livemint.com/2009/12/29222835/Shape-of-distribution-market-i.html

KARVY, CAMS launch `FINNET`

Computer Age Management Services (CAMS) & Karvy Computershare (KCPL), the two largest service providers of the mutual fund industry have joined hands to launch `FINNET`.

The product, designed for mutual fund distributors, will enhance the services to stakeholders in increasing geographical footprints, improve operational efficiencies and most importantly reduce cost significantly.

This is the first time that two the biggest registrar and transfer agents, who between them service 95% of the MF industry, have come together to offer a unified product. FINNET `is an all in one engine` product which facilitates transacting (order placement), execution and customer service on an integrated system. It will empower the distributors and individual financial advisors (IFAs) to cut across geographic barriers, access information relating to and transact on the schemes of nearly all the mutual funds through an internet enabled user interface.

Speaking at the launch, V Ganesh, country head, KCPL said, ``We are delighted to launch `FINNET` which will help create a strong value proposition amongst the distributors and eliminate duplicated efforts by distributors as well as investors. Distributors can aggregate their customer portfolio and provide a number of value added services with embedded CRM tools available in the product.``

The new model will facilitate multi-manager funds service support across mutual funds and better access to information than ever before. It will also empower the distributors to transact up to 3 pm from their offices without any geographical limitations. It will enable the distributors to generate consolidated account statements across all funds, thereby further strengthening client engagement and boosting customer service.

NK Prasad, executive director & chief operating officer CAMS said, ``This partnership will extend an all embracing management reporting and decision support ensuing better customer service at a fraction of cost and negligible risk.``

This initiative will go a long way in achieving substantial market penetration and in bringing in additional retail investors to participate in mutual funds.

CAMS is the largest service provider to Indian mutual fund industry providing comprehensive package of transaction processing and customer care.

KCPL is the largest integrated registrar and transfer agent in the country servicing more than 350 corporates and 23 domestic mutual funds.

Source: http://www.myiris.com/newsCentre/storyShow.php?fileR=20091229184401194&dir=2009/12/29&secID=livenews

Diversify and assess risk when building portfolio

People think and react differently when there is talk about investing. Some do not even allot much time to think and plan their investments. Financial advisors say investment planning is as important as earning. It's basically putting your money to work or at places where you might need it someday. There are various investment instruments available in the markets and one should give a serious thought to planned and informed investment decision-making. You should look at various investment instruments according to your needs and allocate funds accordingly.
These are some of the broad categories of instruments available in the markets:

Tax-savings instruments
Taxes drain a significant portion of an individual's hard-earned money. Therefore, one should look at using all possible ways to save taxes, especially those in the higher tax bracket. There are provisions for investments in various instruments which qualify for tax rebates. For example, one can invest in PPF, National Savings Certificate or tax-saving bonds. Getting into the last quarter, investors should look at various schemes and reduce their tax liabilities.

Insurance instruments
The thumb rule regarding investments in insurance is that an investor should have an insurance cover of at least five times of his annual income. One should also look at a balance between term plans and endowment plans to optimise the funds outgo and risk cover. It is advisable to take insurance cover during the early part of life to ensure lesser premium and higher risk cover. Health insurance is another area which should be seriously considered by investors who do not have appropriate health cover for themselves and their family.

Debt instruments
Debt-based instruments usually guarantee principal security. There are various classes of debt-based investment instruments available in the market. For example, deposit schemes (bank fixed deposits, post office deposits, company deposits), debt mutual funds, saving schemes (PPF, NSC) and liquid funds. Debt instruments should be part of every investor's investment portfolio. Inclusion of debt-based investment instruments provides stability to a portfolio and reduces the overall risk. However, the percentage allocation towards equity and debt-based instruments should depend on the risk profile of the investor and prevailing market conditions.

Equity-based instruments
There are various schemes and investment instruments available in the market in this category. There are two broad categories - direct investments in stocks or indirect investments by way of mutual funds. Those who have time and adequate understanding of the markets should look at the direct investment method. Others should look at investments through mutual funds. Investors should look at diversification by investing in many mutual funds and the investment decision should not be driven by past statistics only as they might be misleading at times.

Gold
Investments in commodities, especially gold, have found favour in recent times. The gold-based investments add another dimension to a portfolio. It acts as a debt instrument and usually provides good returns during uncertain economic conditions. The investments in gold can be through various gold funds or buying gold bars from the market. Buying gold ornaments should be treated as consumption rather than an investment.

Source:http://economictimes.indiatimes.com/features/financial-times/Diversify-and-assess-risk-when-building-portfolio/articleshow/5382176.cms

Time to review your portfolio

New Year eve always brings in hope in addition to excitement. It is time for retrospection, resolutions and perhaps making new road maps. Among other things in life this is true for your investments too. It is time to review your portfolio and plan for the new year ahead to achieve even higher ground.

Tax planning investments
The first quarter of the calendar is incidentally the last one for the financial year and hence it is usually heavy with investments in tax-saving instruments such as specified mutual funds, provident funds, tax-saving bonds etc. However, if you are going to do most of your tax-related investments in the last three months then you should resolve for the change in this habit next year.

It is prudent to plan your tax-related investments right from the start of the financial year. For instance, provident fund investments should be made before fifth of every month to reap maximum interest and compounding benefit. In the same way, mutual fund investments can be made through a systematic investment plan (SIP) to average out the market ups and down and keep the cost low. Hence, doing it evenly throughout the year not only keeps you off the last minute burden but also helps you reap much higher returns.

With the economy showing signs of revival, there is definitely going to be lot of buzz in the stock markets. We are most likely at crossroads when change in due. But, change is always uncertain and slow to occur. All you need to do is to stick to the basics with this asset class in these times.

What this means is that you will have to work harder to dig deep, do your due diligence to find the value picks. Prudence would demand that you stick to core sectors such as infrastructure, auto and pharma where you can monitor the growth and all you need to do is spot the value picks in the sectors.

A lot would depend upon how factors such as the monetary policy, union budget, monsoons, and inflation here, as well as the US interest rates and foreign institutional investor (FII) inflows behave, and that will determine the direction of the markets. So watch these windows as the action unfolds in the next 12 months.

One good thing about mutual funds is the fundamental advice of sticking to the systematic investment route remains unchanged irrespective of the investment climate and time. So, it is the advice this time too - to stick to this fundamental principal to reap the best benefit of this asset class.

However, stay away from any exotic theme funds and even the new fund offers unless they provide good reasons. There is a plethora of existing funds to choose from.

All that glittered in the past few months was indeed gold. However, it may not continue to do so forever. One must treat investments in gold primarily as hedging simply because of its impeccable track record of over 2,000 years as a store of value.

Any attempt to go overboard and treat the asset like equity to make money in the short term would be a hasty move. Do not forget that it has given good returns in the past few months because other assets haven't , and that is its primary job as a hedge in your portfolio.

Any move to divert higher funds to gold at the expense of other assets would also mean bigger opportunity loss. Hence, resist the temptation and stick to the basic rule of keeping gold to about 15 percent of your portfolio.

Source: http://economictimes.indiatimes.com/quickiearticleshow/5384346.cms

A year for all asset classes

The Indian investor would have generated healthy portfolio gains this year; with no asset class acting as a drag on the other.

The year witnessed a rise in valuations across asset classes such as equities, gold and realty.

If 2008 was a year when most asset classes failed to perform, 2009 was one when almost every popular asset class provided an opportunity to build wealth. Be it equities, debt, gold or real estate, the Indian investor would have generated healthy portfolio gains this year; with no asset class acting as a drag on the other.

Surprised? Well, here's how you would have made a quick buck by just staying invested round the year, across asset classes.

Debt for all seasons

Take the simple time-tested debt option; fixed deposits with banks. Looking back, you would be surprised to know that these fixed return investment havens lured investors with interest rates as high as 12 per cent in end of 2008. Of course, the beginning of any lucrative offer or rally is often overlooked.

Even if you had been a late entrant and missed the 12 per cent rates, locking in to fixed deposits in January 2009 would have still guaranteed an 11 per cent interest rate.

Missed the bus there and watched bank interest rates sadly dwindle? Never mind, a series of non-convertible debentures issued by companies such as Tata Capital, Shriram Transport Finance and L&T Finance at various time periods between February and August offered interest rates between 10 and 12 per cent. It's not just the interest rates that made these offers noteworthy. These non-convertible debentures (NCDs) are traded in the stock exchanges and can be sold anytime.

Take the case of Tata Capital NCD offered in February. It currently trades 22 per cent above its offer price. A rather neat return from a debt option.

And as if that was not enough, corporate deposits – tagged risky in the initial part of the year given the high leverage of their underlying companies – soon provided comfort with improving financials. Interest rates of 9-12 per cent offered (and still on offer) by many creditworthy finance companies such as Sundaram Finance or Mahindra Finance followed by a number of corporates ensured that investors were not short of good debt options for most part of the year.

Debt mutual funds too, played their part well in ensuring that investors were not disappointed.

Rich, richer …

If debt was not exactly your idea of building wealth, then let's move on the most-loved and at times the most-hated asset class – equities.

Returns of 120 per cent from the March lows would only have been a dream for many as few could have timed their entry in to equities in March, given the undercurrent of pessimism then. However, even if you had waited a while and invested sometime during May (when mutual funds too derived conviction to move fully in equities from their deep cash positions), chances are that you would have made a neat returns of about 50 per cent (returns generated by the broad market index CNX 500, during this period). And had you taken the mutual fund route, your returns could have been much higher.

Real opportunity

Not often do you get a real deal – when a reasonable property price and low home loan rates are offered at the same time. Well, 2009 is one such year.

While it would be hard to generalise, property prices were available at a bargain beginning February and extending up to June-July. To enable you to purchase at bargains, interest rates offered by banks also dipped to as low as 8 per cent (and still remains so). However, property prices, especially in the middle income offerings, were not available at discounts for too long as select areas across cities witnessed appreciation.

Between June and September alone capital values of residential properties in key cities such as Mumbai, Gurgaon and select parts of Chennai and Bangalore have seen a rise of between 10 and 25 per cent. Had you been among the smart investors who bought a property before June, you may already be sitting on substantial gains.

Not just property prices, homes loans with interest rates kept fixed for 3-5 years at 8-9 per cent could certainly be called some deal. And to think, a home loan would have cost you as much as 12 per cent a year ago. If that does not make an impact sample the difference in terms of EMI: A Rs 20-lakh, 15-year home loan at 12 per cent would have resulted in an EMI of about Rs 23,000 a month. At 8 per cent, there is a drastic reduction by Rs 4,000 a month to Rs 19,000.

The gold rush

Besides debt, if there was one asset class that endowed multiple opportunities to earn returns in 2009, it would have to be gold. Had you invested in gold (through exchange-traded funds) as early as January, this asset class would have yielded a good 20 per cent profit. Had you delayed your purchase to, say, June, the returns would have been 10 per cent – not too lucrative but nevertheless attractive for a safe asset class like gold that does not always generate returns that beat inflation.

So 2009 would certainly go down in history as one of those singular years where every asset class held by you added to your portfolio wealth; that is only if you had invested those cash holdings in to some of these options.

Source: http://www.thehindubusinessline.com/iw/2009/12/27/stories/2009122751081100.htm