Sebi ‘super ATMs’ to spread info on MFs

With a view to increasing financial literacy, markets regulator, Securities and Exchange Board of India (Sebi) plans to launch over 2,000 ‘super ATMs’ in the country, which will facilitate all the information to mutual funds investors. Apart from this, Sebi is also in the process of starting financial literacy and investor education programmes throughout the country to encourage retail investors to participate in mutual funds.

Speaking at an awards ceremony on Thursday, K Vaidyanathan, executive director Sebi said, “Super ATMs will provide better infrastructure to investors throughout the country and we hope to start this initiative in the next 12-18 months.”

CB Bhave, chairman, Sebi, while speaking at the event, said the Indian mutual fund industry is at the crossroads and should not expect phenomenal results in the next six months. Bhave said, “It is always difficult to accept change but if you are confident that the change is good for the consumer, you eventually accept it.” In the year 2009, several regulatory changes were made, such as the ban on entry load and parity among all the classes of investors in the exit load structure.

Bhave also added that Sebi is ready to help the mutual fund industry in the country, in their efforts to increase the financial literacy. “We have already started some programmes for financial literacy and the education of investor. But we also want that fund houses come and present to us their plan for the purpose so that we can help them out.”

Apart from this, Vaidyanathan also mentioned that the regulator will play a twin role for investor interest protection through regulations and also through developmental activities. “Performance is also the important factor and we would like to see this business revolve around the investor’s managers and also the performance,” he added.

After the ban on entry load, several distributors had stopped selling mutual fund schemes, as their upfront commission completely vanished. Since the ban on entry load from August, 2009, equity schemes have seen net outflows for the next five months to the tune of over 7,000 crore as distributors stopped selling mutual funds.

However, in January, 2010, some smart inflows came in equity schemes after three new fund offers (NFO) were launched. Total average assets under management for the month of January, 2010 stood at over Rs 7.61 lakh crore, according to the data provided by the Association of Mutual Funds in India.

Source: http://www.financialexpress.com/news/Sebi--super-ATMs--to-spread-info-on-MFs/579081/

UTI MF Declares Dividend for Contra Fund

UTI Mutual Fund has announced the declaration of dividend on the face value of Rs 10 per unit under dividend option of UTI Contra Fund. The record date for dividend has been fixed as 17 February 2010.

The quantum of dividend will be 10% (Rs 1 per unit). The NAV of the scheme stood at Rs 12.68 as on 10 February 2010.

UTI Contra Fund is an open ended equity oriented scheme which has the investment objective to provide long term capital appreciation / dividend distribution through investments in listed Indian equities and equity related instruments. The Fund's investment policies are based on insights from behavioral finance. The fund offers an opportunity to benefit from the impact of non-rational investors behavior by focusing on stocks that are currently undervalued because of emotional and behavioral patterns present in the stock market.

Source: http://www.bloombergutv.com/stock-market/mutual-fund/commentary/374729/uti-mf-declares-dividend-for-contra-fund.html

10-yr bond yield hits 16-month high

India's benchmark 10-year bond yield rose to its highest in 16 months on Thursday as traders began pricing in improved economic conditions, with higher US yields overnight also denting market sentiment.

At 9:07 a.m. (0337 GMT), the yield on the benchmark 10-year bond was at 7.82 per cent, which was its highest since Oct. 15, 2008. It had ended at 7.78 per cent on Wednesday. Industrial output data due on Friday is forecast to show annual growth of 12 percent in December, close to the 11.7 per cent rise in November.

Finance Minister Pranab Mukherjee on Wednesday forecast the economy would grow 7.75 per cent in 2009/10, faster than a government projection on Monday of 7.2 per cent.

Source: http://economictimes.indiatimes.com/markets/bonds/10-yr-bond-yield-hits-16-month-high/articleshow/5558946.cms

Investors can now buy foreign ETF listed on NSE

Indian investors will soon be able to buy a foreign exchange-traded fund (ETF) listed on the National Stock Exchange (NSE). The coming Monday will see NSE list the Hang Seng BeES, an open-ended index scheme, which tracks the Hang Seng on a real-time basis.

Promoted by Benchmark Mutual Fund, this will be the first foreign ETF which will enable investors to take exposure to a hitherto closed market like China.

“All the regulatory approvals are in place and we will go live from February 15,” Sanjiv Shah, ED, Benchmark Mutual Fund, told ET confirming the development. “Hang Seng BeEs will enable an Indian investor to buy into the largest manufacturing economy in the world (China),” he added.

ETFs are just what their name implies: baskets of securities that are traded, like individual stocks, on an exchange. Unlike regular open-ended mutual funds, ETFs can be bought and sold throughout the trading day like any stock.

Most ETFs charge lower annual expenses than index mutual funds. However, as with stocks, one must pay a brokerage to buy and sell ETF units, which can be a significant drawback for those who trade frequently or invest regular sums of money.

Fund managers at foreign brokerages who track ETFs globally believe that this is one more diversification opportunity for the Indian investor, but more specifically for high networth individuals (HNIs).

“China is a market everyone wants to be a part of. But how many Indian investors track it on a real-time basis or keep up with market trends there? This ETF will be a quick and easy way of accessing Chinese markets,” said the head-equity products at a foreign brokerage on condition of anonymity.

Significantly, India ETFs have been gaining ground overseas, as a low-cost option to get exposure to the Indian stock market in a diversified, low-cost portfolio. A query as to the timing of such a product elicited the response that this is a structural trend and not a cyclical one. “It is better to launch a product in volatile market conditions and take it slow and easy,” a fund manager added.

Interestingly, last Friday when the market witnessed an unusually high degree of volatility, Rs 50 crore worth of Nifty BeEs were traded. Benchmark Mutual Fund currently has five equity ETFs being traded on the NSE, Nifty BeEs, Junior Nifty, Bank BeEs, Shariah and PSU BeEs.

Officials said that there is no entry or exit load on Hang Seng BeES purchased and sold on the NSE. However, an investor will have to pay a fee in the form of a bid and ask spread and brokerage and other charges as may be levied by his broker.

The asset allocation of Hang Seng BeES will be 90-100% into securities constituting the Hang Seng Index and 0%-10% into money market instruments, low G-Secs, bonds, debt instruments, cash at call and mutual fund schemes/overseas exchange-traded funds based on the Hang Seng index.

Source: http://economictimes.indiatimes.com/markets/stocks/market-news/Investors-can-now-buy-ETF-listed-on-NSE/articleshow/5558399.cms

IDFC MF Introduces New Plans

IDFC Mutual Fund has announced the introduction of new plans, ‘Plan C' under IDFC Super Saver Income Fund - Medium Term (MT) and ‘Plan D' under IDFC Super Saver Income Fund – Investment Plan (IP). The plans are to be introduced with effect from 10 February 2010. The features of the plans are as follows:

Plan C & Plan D under the respective schemes offers growth, dividend & dividend sweep options. The plans introduction price is Rs 10 per unit and at applicable NAV thereafter. Minimum application amount is Rs 5000 & in multiples of Re 1 thereafter. Entry load charge will be nil.

Exit load charge for IDFC Super Saver Income Fund-MT – ‘Plan C' will be 0.50% of NAV on investors who purchase / switch and seek to redeem / switch out such investment within 182 days from the date of effecting such purchase / switch in. Investors opting for PEP / Dividend reinvestment option /SWP or switch between options within the plan will not be levied an exit load.

Exit load charge for IDFC Super Saver Income Fund-IP – ‘Plan D' will be 1% of NAV on investors who purchase / switch and seek to redeem / switch out such investment within 365 days from the date of effecting such purchase / switch in. Investors opting for PEP / Dividend reinvestment option /SWP or switch between options within the plan will not be levied an exit load.

Source:http://www.adityabirlamoney.com/Default.htm

Total assets of MF increased by 14.07% in January 2010

The mutual fund (MF) industry registered 14.07% increase in total asset under management (AUM) to Rs 7.59 lakh crore as on 31 January 2010 from Rs 6.65 lakh crore as on 31 December 2009. The huge inflow on account of income funds aided the increase in total asset during the month of January 2010.

Average Assets under management (AAUM) of MF fell by 4.14% for the second consecutive month to Rs 7.62 lakh crore in January 2010 compared with Rs 7.94 lakh crore in December 2009, according to the data released by the Association of Mutual Funds in India (AMFI). Banks staying away from investing into mutual funds has been the primary reason for erosion of the AAUM.

Association of Mutual Funds in India (AMFI) has released monthly data of the industry for January 2010. The industry has launched 7 new schemes, out of which, four schemes belong to income fund and three under equity funds category in month of January 2010. The new funds launched have mobilized around Rs 1947 crore during the month under review.

It was only income funds that witnessed a huge rise in total assets in January 2010 compared to fall in December 2009. The total assets of income funds registered the highest increase of 30.58% in January 2010. Apart from the income funds, gold ETF and other ETF'S also registered increase in their asset base by 5.40% and 22.41% respectively. While all the other funds such as - liquid funds, equity funds, balanced funds, gilt and ELSS funds registered dip in their asset base during the month under review.

The MF industry recorded the net inflow of Rs 97242 crore in January 2010 against the outflow of Rs 157204 crore in December 2009.

Equity Funds

The total asset of equity funds has declined by 3.76% to 1.68 lakh crore as on 31 January 2010 from 1.75 lakh crore as on 31 December 2009, as equity benchmark indices witnessed fall during the month under review. The Bombay Stock Exchange's Sensex and National Stock Exchange's Nifty fell by 6.34% and 6.13%, respectively, in January 2010.

The fall in asset base took the weightage of equity funds down to 22% in the total assets of the industry as against 26% in December 2009. However equity funds witnessed a net inflow of Rs 980 crore and total redemption of Rs 6857 crore in the month of January 2010.

Income Funds

The Income funds stood in limelight with highest inflow of Rs 1.06 lakh crore in January 2010 compared to outflow of Rs 1.05 crore in December 2009. At the same time the redemption also remained quite heavy at Rs 2.22 lakh crore in January 2010 compared to just Rs 6232 crore in December 2009.

However the total asset of income funds zoomed by 30.58% to 4.71 lakh crore in January 2010 compared to fall of 28.16% to 3.60 lakh crore December 2009. This translated into increase in income funds AUM weightage to 62% compared to 54% in December 2009.

Liquid Funds

Liquid funds also recorded highest outflow for the second consecutive month at Rs 10218 crore in January 2010 as against outflow of Rs 14267 crore in December 2009. Liquid funds also witnessed highest redemption of Rs 5.57 lakh crore as against outflow of Rs 5.53 lakh crore in December 2009. The total asset declined by 10.74% to Rs 71502 crore in January 2010 compared to 20.64% fall in December 2009.

Gilt Funds

AUM of gilt funds fell by 6.87% to Rs 3361 crore in January 2010 from Rs 3609 crore in December 2009. Gilt funds had net outflow of Rs 257 crore and redemption of Rs 454 crore for the month under review.

Other Funds

ELSS-Equity Funds witnessed net inflow of Rs 268 crore but declined by 3.33% in its total assets. Gold ETFs registered net inflow of Rs 112 crore and its total AUM increased by 5.40% to Rs 1425 crore in January 2010. The total AUM of other ETFs also increased by 22.41% in January 2010 while, the Fund of Funds and balanced funds recorded fall of 9.76% and 2.67% respectively in their assets.

Mutual Funds were net sellers of Rs 1311.30 crore in the equity market and net buyer of Rs 31333.50 crore in debt market in the month of January 2010.

Source: http://www.adityabirlamoney.com/Default.htm

Peerless MF biz launched

Peerless General Finance & Investment Company Ltd (PGFI) on Tuesday announced the commencement of its mutual fund business, Peerless Funds Management Company Ltd.(PFMCL), as a wholly-owned subsidiary of PGFI.

The products intended for launch in coming months include liquid and ultra short term funds catering to institutional needs and savings fund for retail customers.

PFMCL, according to Mr S.K. Roy, Managing Director of PGFI, is the first financial services company in eastern India to have received the SEBI approval for setting up its asset management company.

“With a growth rate of over 30 per cent CAGR in the past six years, the mutual fund business in India presents an interesting opportunity and this venture is consistent with our plan to capitalise on the opportunities and emerge as the country's leading financial supermarket,” Mr Roy observed while addressing a news conference here on Tuesday.

Mr A.C. Chakraborti, Chairman of PFMCL, felt that organised mutual fund business being still concentrated in metros, there were considerable opportunities for expanding business in tier-II and III cities and semi-urban markets.

“We're hopeful of meeting the needs of investors in these locations through the company's extensive network of branches, product bouquets and customised services,” he said.


Source: http://www.thehindubusinessline.com/2010/02/10/stories/2010021051481700.htm

Why liquid funds may soon lose their sheen

Debt funds will now have to value debt papers as per the prevailing market prices if they mature after three months, up from the earlier six months

One of the least risky products in the mutual funds (MF) space just got riskier. From 1 July, all debt funds will have to value their debt papers as per the prevailing market prices if they mature after a period of three months, down from the earlier six months. The Securities and Exchange Board of India (Sebi) made this mandatory through a circular issued on 2 February.

Money market instruments will also be valued similarly, said Sebi. This means that your ultra short-term (ST) fund, earlier known as liquid-plus schemes, will become riskier.

The problem

When the markets fell in 2008, investors made a rush for redemptions. MFs had to arrange for cash on a short notice since they did not anticipate so many redemptions. They had to sell assets at throwaway prices and incur losses. Three ultra ST funds gave negative returns, contrary to expectations.

Earlier, debt securities maturing before six months were not required to reflect their prevailing market prices. They used the amortization method. To put it simply, if your debt fund invested in a debt security with a face value of Rs100, carrying a coupon rate of 5% per annum and matured in five months, it would have spread the total interest income of Rs2.10—or Rs0.014 per day—over the debt paper’s tenure. In other words, only those securities that mature after six months would reflect market’s volatility depending on how their market prices move. Also, money market instruments—in which ultra ST funds invest a chunk of their assets—were valued through the amortization method, as per Sebi rules.

In 2008, when the debt markets turned volatile, ultra ST funds did not reflect the reality and their net asset values (NAVs) continued to show a steady rise. A chief investment officer of a leading asset management company said, on condition of anonymity: “Debt funds with shorter duration had large maturity scrips, out of line with their risk profile. Also, much of these debt papers were not valued, giving a false sense of stability to investors.”

Ever since, Sebi has taken corrective steps to ensure that MFs are in line with their objectives and do not convey a message that is not in sync with what they can actually offer.

What has changed?

Sebi now wants debt funds to value their underlying securities more realistically. They will now have to mark-to-market all those debt papers that mature after 91 days. Money market instruments, such as certificates of deposit, commercial papers, collaterized lending and borrowing offerings, were not marked to market even when they matured after six months. Now, these too will be marked to market.

As most ultra ST funds invest up to 90% of their corpus in such instruments, they are set to become more volatile. “Ultra ST funds invest significantly in money market instruments. Now their NAVs will be more volatile and they can also give negative returns on some days,” says Mahendra Jajoo, head (fixed income), Pramerica Asset Managers India Ltd, which is waiting for Sebi’s second-stage license to start its MF operations in India.

They will be more realistically priced as most of their underlying instruments will reflect the prevailing market price.

More realistic

Ultra ST funds are set to lose sheen as they will now be more realistically priced. Fund houses introduced these funds in 2007 when the year’s budget increased the dividend distribution tax (DDT) for corporates from 14.03% to 28.03% in liquid funds. Ultra ST funds were devised to provide liquidity with the tax advantage.

Your fund manager’s skills would be tested to the hilt. “Fund managers will have to sharpen their skills to be able to dynamically manage the duration of funds and debt papers,” said Maneesh Dangi, head (fixed income), Birla Sun Life Asset Management Co. Ltd. “Liquid funds are safer as they can’t invest in debt papers that mature after 90 days,” said Arvind Chari, debt fund manager, Quantum Asset Management Co. Ltd.

Industry sources say that Sebi’s latest move is just the beginning. To ensure that a October 2008-type crisis is not repeated and corporate investors do not use the MF route to save taxes, the coming Budget may plug the loopholes, experts predict. Just like liquid funds, ultra ST funds may also have to pay higher DDT to reduce the tax arbitrage that corporates now enjoy.

Ultimately, such moves will only help the industry focus more on retail than institutional investors. About 66% of the industry’s corpus lies in ultra ST and liquid funds as per the December figures released by the Association of Mutual Funds of India. Reforms such as these would nudge the industry to focus more on retail investors.

Source: http://www.livemint.com/2010/02/08211205/Why-liquid-funds-may-soon-lose.html