IDFC Capital Protection NFO

IDFC Mutual Fund has announced the launch of its IDFC Capital Protection Oriented Fund Series-1 which is a three year close ended fund.

The fund would invest up to 100 per cent in debt securities and money market instruments while it would also invest up to 16 per cent in equity and equity related instruments.

The fund would initially deploy at least 84 per cent of the funds collection during the New Fund Offer (NFO) period in debt securities and money market instruments with an intention to protect the principal capital at the time of maturity of the plan.

This i
s the 12th capital protection fund in the entire mutual fund industry while the first in the IDFC fund house family.

In the words of Kenneth Andrade CIO, IDFC Mutual Fund, “Through this fund we aim to provide an attractive investment solution to the conservative investors in India who have over 46 lakh crores invested in Fixed Deposits. This fund offers an investor twin benefits of making their money grow inline with inflation while ensuring that their capital remains protected”.

The fund has been benchmarked against CRISIL MIP Blended Index. The fund would be managed by Ashwin Patni who holds B.E and PGDM degree from IIM, Calcutta. He holds over six years experience in wealth management, structured Finance, credit and market groups and business consulting. He also jointly manages IDFC Arbitrage fund and IDFC Arbitrage Plus Fund.

The Minimum application amount is Rs 5,000 and the fund offers both growth and dividend options.

The New Fund Offer (NFO) period started on February 24, 2010 and would end on March 24, 2010. No exit load would be applicable.


Source: http://new.valueresearchonline.com/story/h2_storyView.asp?str=101299

Diversified equity funds return 115% in a year

Principal Emerging Bluechip top performer with 201% returns.

What a turnaround for mutual fund investors it has been in the past one year.

Since March 9, 2009, (when markets touched their lows), when all class of investors were pessimistic about the market movement owing to the continuous flow of negative information, the markets have rebounded spectacularly, more than doubling in the period.

The average return of diversified funds was 115 per cent. Of 290 diversified schemes, 89 of them have clocked return in excess of 115 per cent and 125 of them outpaced the BSE Sensex.

For the same period the bellwether BSE Sensex moved up by 105 per cent (index on March 9, 2009 was 8160) and S&P CNX Nifty by 95 per cent.

Returns
It has been a year of golden returns for equity and mutual fund investors.

Investors who preferred to route their cash through mutual funds were laughing all the way to the bank, with some of the schemes clocking a returns of between 150 and 200 per cent.

Those who had faith in the market and bought, when others were in fear, made merry. But the return divergence was wide between the best in the diversified funds category and the worst.

Principal Emerging Bluechip was the top performer with a return of 201 per cent over the last one year.

The fund was launched in October 2008 – close to bottom of the market – and its performance was aided by sheer selection of stocks and sectors.

Others who shared the honours were Magnum Emerging Business with 193 per cent, Taurus Infrastructure and ICICI Pru Discovery with 185 per cent returns.

Among those who missed the rally were JM HI FI, Religare AGILE and HSBC Dynamic. They have let down their investors with a poor return of 45-60 per cent.

What clicked
The most common theme among the performers was that they all stayed invested during the market correction and they all had sizable exposure to mid-cap stocks.

All the “outliers” held cash less than 15 per cent of the total assets in March 2009, the period when the market was undergoing a turnaround.

They had well diversified portfolios. Most of them also invested in sectors that witnessed and indeed led a tremendously rally.

Principal Emerging Bluechip was overweight on banking, Magnum Emerging had invested 22 per cent of the assets in construction and projects, while Taurus Infrastructure was over weight on construction and power. ICICI Pru Discovery, the value fund, was overweight on banking and pharma.

Surprisingly they all have invested less in the software sector. The BSE IT index clocked 155 per cent over a one year period.

Laggards
JM HI FI was overweight on cement and invested 20 per cent of its assets there. HSBC Dynamic has invested in banks, consumer nondurables, pharma and software but what made the difference was that it had invested predominantly in large-cap stocks that rallied less than mid-caps .

Source: http://www.thehindubusinessline.com/2010/03/10/stories/2010031051631000.htm

Ask your wealth manager for money back

A few months ago, I said I wanted to be a mutual fund agent because it was a great life. I change my mind – I want to be a wealth manager instead. Mutual fund agents are limited to earning commissions on just mutual funds, and thanks to SEBI, those are now in the realm of sane amounts. Wealth managers on the other hand, have whole suite of commission eating opportunities – real estate funds, private equity funds, structured products, and if nothing else, the erstwhile ULIP, which was created for everyone except the end customer to make money. It really is a phenomenal life. You don’t really need to make any investment decision and if the client does lose money, you can conveniently blame the fund manager, because you never handled the money in the first place. You appear smart and sophisticated because you can apparently do “asset allocation” and “risk management”, people trust you because they think you know how to evaluate products, when in reality, you are pushing high commission products down people’s throats.

Do you know what the highest selling products in the wealth management market have been? ULIPS, for one, because distributors are earning as much as 50% of the premium in commissions, entirely upfront. Private equity funds are another market favourite. They can lock-in capital for 3 years, and pay the distributor a hefty 3-4% commission upfront. Why make 1% in trail on an equity mutual fund, when you can sell a client a more exotic product that pays you four times the fees, all upfront?

Even worse, individual investors don’t realize the curse of commissions, because there are no entry loads and wealth managers claim to be product neutral. The reality is murkier. Because a fund house has to pay a distributor commission, he has to charge you higher fees, so there is enough for everyone to eat. The reason equity funds in the US charge 0.75% to 1% while Indian funds charge 2% is not because Indian funds are adding twice the value – it’s because in India, a fund manager has to feed the distributor to survive. The total fee an equity mutual fund manager earns is around 2%, typically paid every quarter. Of this, even after the change in SEBI regulation, the fund house has to pay as much as 1.5% of the fee as commission to the distributor, most of it upfront. The fund manager, at the end, is left with a meagre 0.5%. Moreover, the fund manager is paying the distributor before he earns most of his fees, only to have the distributor convince the client to buy another fund in six months. Besides the atrocious principle that a distributor is earning more than the individual managing the money, the practice is driving fund managers bankrupt. No wonder most AMCs in India are unprofitable. Worse, it’s killing innovation in the investment market because a fund house’s only incentive is to create long lock-in products that can pay the highest commission – think ELSS or tax-saver schemes.



There is a solution to the problem, a drastic one, but one that investors should think about. Wealth manager should be happy with the advisory fees they are charging, and if they aren’t charging advisory fees, they should start charging them. They should then tell the customer exactly what commission they are earning from each product they are selling, and REFUND the whole commission back to the client. A client will see the commission wealth managers earn and the incentives they actually have, and a wealth manager will truly be product neutral. The customer will pay less investment management fees because he doesn’t have to bear the cost of the distributor, and will pay the wealth manager an advisory fee he deserves. The net results – clients will pay for the services they need and investment professionals for the value they actually add, not the bargaining power they have as middlemen. If a client doesn’t need advice they won’t pay for it, and if a wealth manager cannot give advice, he won’t get paid for it. Simple.

End clients are the only ones who can clean the asset management system of the corruption of commissions, ultimately for their own benefit. Maybe then I won’t see clients who have had wealth managers invest them in 95 different mutual funds (and this is not an exaggeration) or 70-year old retirees who have been sold private equity funds by their investment advisor. Maybe then, we will see a growth in what is right now a very small breed of wealth managers who refuse all commissions and are happy just giving advice. And maybe then, the fund managers of the world will design great investment products, rather than great commission generators.

The next time you talk to your wealth manager, tell him to show you a statement of exactly what commissions he has earned. There is enough competition in this market that you, the end client, can get with the question. And if your wealth manager doesn’t agree, find a wealth manager who will, because they exist. Pay the right fees and do all of us a favour – go, ask for cash back.

Source: http://www.moneycontrol.com/news/mf-experts/ask-your-wealth-manager-for-money-back_445632.html

MFs line up best global assets for investors

The desire among India’s well-heeled investors to look beyond local equity markets has domestic mutual funds rushing to offer products that reflect returns of overseas assets. In this financial year so far, asset management companies have launched five such schemes that route funds to overseas funds investing in Chinese shares to global real estate to commodities, as Indian investors seek to capitalise on assets that are not available in domestic markets.

Though the response to these schemes has been largely cold so far, domestic mutual funds — mostly with foreign parentage — plan to introduce more such schemes locally in the hope that the exclusivity of these products will lure Indian investors to test their fortune in them. A majority of investments of Indian investors in mutual fund schemes are in domestic equities and debt instruments.

“We want to launch a few other products that are not available in India and especially in the ones where our expertise has been proven globally,” said Ashu Suyash, MD and country head — India, Fidelity Investments, which recently launched its global real assets fund, which invests in a Luxembourg-incorporated global real asset securities fund that in turn puts money into global energy, materials and real estate assets among others.

Other such schemes, popularly known as feeder funds, launched this year include DSP BlackRock’s World Energy Fund, World Mining Fund, JP Morgan’s Greater China Fund and Mirae Asset’s China and Global Commodities funds. Benchmark Asset Management also recently launched India’s first international exchange traded fund that captures returns from Hang Seng. HSBC Mutual Fund has sought Sebi’s nod to introduce a scheme that invests in a Brazilian fund.

Industry officials said a large chunk of the investments in these funds is from relatively wealthy investors, mostly from metros.

“The fresh idea that these schemes bring is what attracts investors to them, as India is increasingly being linked to global market. Mutual funds are looking to capitalise on this curiosity factor,” said a top official with a private mutual fund.

According to Morningstar, assets of fund-of-funds that invest overseas stood at Rs 1,395 crore as on February 28, as against Rs 1,170 crore September-end. Mutual fund industry had assets worth about Rs 7.8 lakh crore as on February 28.

Wealth managers feel increased access to various commentaries about the outlook of asset classes has lured investors here to such funds.

“For Indian investors, it is the performance that matters rather than diverse asset allocation. That’s the reason why feeder funds that mirror commodity (including gold) and emerging market assets have been relatively popular,” said Ashish Kehair, head-products & strategy, global private clients, ICICI Securities.

Mr Kehair, however, added that the interest among investors is still far from satisfactory. This is because such schemes are yet to receive the status of an equity fund for favourable taxation purposes and there is lack of awareness about the prospects of these products.

Source: http://economictimes.indiatimes.com/markets/stocks/market-news/MFs-line-up-best-global-assets-for-investors/articleshow/5665048.cms

Mirae Asset appoints Gurpreet Singh as National Sales Head

Mirae Asset Global Investments (India) has appointed Gurpreet Singh as its National Sales Head.

Singh will be responsible for spearheading the sales and distribution function of the AMC for the mutual fund schemes portfolio spanning equity and fixed income products, a press release stated here today.

Prior to joining Mirae Asset, Singh was associated with ABN AMRO Bank and ICICI Prudential Asset Management Company in senior capacities, the release said.

"I am sure Gurpreet will play a pivotal role in our endeavor to establish a strong foothold for Mirae Asset Global Investments in the Indian Mutual Fund industry," Mirae Asset Global Investments (India), Chief Executive Officer, Arindam Ghosh, said.

Mirae Asset Global Investments (India) is a wholly-owned subsidiary of the Mirae Asset Financial Group.

Source: http://www.business-standard.com/india/news/mirae-asset-appoints-gurpreet-singh-as-national-sales-head/87852/on

Amfi's new CEO looks to stop misselling, moots ombudsman

The Association of Mutual Funds of India’s (Amfi’s) new Chief Executive Officer H N Sinor has set a work agenda to stop missselling of mutual funds products to retail investors and also have an ombudsman for investor grievances. The new CEO also plans to revamp the code of conduct for the industry, which has not changed since the launch of the apex body.

“There is rampant misselling and small investors are very unhappy. Often investors have no understanding of the products they purchase. One has to address this area on a priority basis,” Sinor told Business Standard.

He said a distributor should be suspended from selling mutual fund products in case of misselling. The plan is not to enforce a life-long ban, but a short-term suspension. “There has to be some kind of fear among distributors,” Sinor said. So far, Amfi has take action against just six distributors since its foundation.

Sinor, former CEO of the Indian Bank Association, plans to have quick redressal of investor’s complaint —for which he is planning to put in place an ombudsman. The objective is to have a quick redressal at the ground level.

In order to improve the services provided to investors, Amfi plans to expand the list of services providers, such as Karvy and CAMS, by allowing more players in the business of servicing. In order to bring more transparency in the Rs 7-lakh crore industry, Sinor plans to revamp Amfi’s code of conduct. He said there had been no revamp in the code for the last 15 years.

However, Sinor was not surprised with 20-25 per cent of the industry funds being mobilised through retail investors. He said this was in line with the banking industry, where the current and saving accounts (Casa) contribute around 25 per cent to the banking industry deposits. “It (retail money in mutual fund) is in tandem with the banking industry,” Sinor pointed.

Commenting on the increase in the number of players in the mutual fund industry, he said that there was enough space for all the players. “There is food for everybody,” he said.

Source: http://www.business-standard.com/india/news/amfi%5Cs-new-ceo-looks-to-stop-misselling-moots-ombudsman/387919/

Why Should Insurance Be Sold Differently From Mutual Funds?

A.P. Kurian is a name synonymous with mutual funds in India. The chairman of AMFI, who will step down this September, feels investor education is still an unfinished agenda.

A.P. Kurian
Title: Chairman of Association of Mutual Funds in India (AMFI)
Age: 77
Career: After being the executive trustee with UTI he took official charge of AMFI in 1998
Education: MA in Economics, Kerala University
Interests: Walking, listening to old Hindi and Malyalam songs, involved in social activities

What have been your biggest achievements at the Association of Mutual Funds in India (AMFI)?
There are many that I can think of. AMFI was able to get in world class standards for Indian mutual funds. We were able to bring in a lot of transparency to the industry. Earlier portfolio disclosures were irregular or given on a six-monthly or annual basis. Today mutual funds disclose portfolios on a monthly basis. Then we started the AMFI certification which was later on notified by Securities and Exchange Board of India (SEBI) in the year 1999-2000. The distributor community was asked to take this test to become AMFI-certified. Till now four lakh people have taken this test and half have passed. And I think we are one of the very few countries where mutual fund net asset value (NAV) can be provided on a single platform. In most countries you will have to call the mutual fund individually.

Investors will now have to give two cheques to the financial advisor when they buy funds - One for investment and the other for advisory. How do you look at this situation?
We have a completely different view. In order to make commission transparent, we suggested an open architecture. While filling the form, the investor can make it clear how much should be passed on to the distributor or advisor and write in the broker code on the form. This way, there is no need to write another cheque. Our suggestion did not work well with SEBI.

What is your view on the way unit linked insurance policies (ULIPs) are sold in the country?
I think whatever standards they are using to sell mutual funds should be applied to all the products. Why should post office schemes, fixed deposit schemes or for that matter insurance products be sold differently than mutual funds? Every financial product in the country should be subjected to the same standards and regulations. It should become a system acceptable to the entire community. But I’m optimistic. The level playing field will come in some time.

What is your analysis of the Indian investor?
The Indian investor has become conscious. Over the years, in my observation, his level of understanding [of] complex financial products has gone up. Earlier the guy used to invest into fixed deposit schemes and post office schemes. But today he is moving to slightly risky investments. We have around 48 million mutual fund accounts. If we remove the double counting, we get 30 million individual accounts for mutual funds. This number has to go up.

Is there anything that you left incomplete?
The biggest challenge for mutual funds is investor education. This I think is work in progress. We need to educate the Indian investor to understand financial products. Making people aware about
these products is the biggest challenge.

Source: http://business.in.com/interview/exit-interview/why-should-insurance-be-sold-differently-from-mutual-funds/10912/1

MFs forced to sell shares as inflows dry up

For nearly six months now, Indian mutual funds have been selling more shares than they have been buying, as they grapple with weak inflows into their schemes.

This is in stark contrast to peers like foreign institutional investors (FIIs) and local insurance firms, which have been net buyers during this period. Mutual fund watchers say unless the distribution issues are sorted out and retail investor confidence improves, inflows are unlikely to improve anytime soon.

Cash levels in most equity schemes — diversified as well as sectoral —have come down sharply to 3-4%. This leaves fund managers with little money to deploy in case the market corrects sharply.

According to SEBI data, mutual funds have net-sold around Rs 12,000 crore worth of shares between last September and now. In 2010 alone, local fund houses have dumped Rs 2,107 crore worth of shares at the net level.

Investments into mutual fund schemes have been impacted by market regulator Sebi’s decision in August last year, to abolish entry load. This has led to distributors pushing other products to investors, on which they stand to earn a higher commission.

However, fund managers are of the view that regulatory changes only served to aggravate an already underlying bearish sentiment.

"Sharp swings in the stock market over the past six months have also made investors hesitant about investing at higher levels," says A Balasubramaniam, CEO, Birla Sunlife Mutual Fund.

"Also, many investors have been liquidating a part of their mutual fund holdings to subscribe to public issues. However, we are seeing good inflows whenever there is a sharp correction (in the market)," he told ET.

Nandkumar Surti, CIO, JP Morgan AMC, is of the view that participation in equity schemes is at an all-time low and this is primarily because investor confidence is still not back to the same levels as it was in early 2008.

"The global economy went through its worst phase in 2008, thereby raising a lot of questions on sustainability of the recovery. As such when the market rebounded last year, you saw investors looking to exit at every level or even preferring a marginal exposure to equity," he said.

Fund managers believe that while the pick-up in growth this year is a positive signal, it will be some time before pure equity schemes are back in favour. “For the next 3-6 months, investors will be looking at monthly income plan (MIPs), balanced funds, or structured products. One could see investor confidence return by FY11 or the latter half of 2010," feels Mr Surti.

Even as mutual funds saw their market share erode marginally on continued outflows, insurance companies have been steadily upping their equity exposure.

"Domestic funds have yet to recover from regulatory changes in August, and remained sellers in the past quarter. At $62 billion, the insurance portfolio is now 28% larger than the mutual fund portfolio (both across equities). The January-March quarter is usually the strongest for insurance companies. And we would expect their market share to rise further, going forward," say equity strategists Aditya Narain and Tirthankar Patnaik of Citigroup Global Markets in their India equity strategy report.

"We have seen some amount of pick-up in interest in February and if there are no unpleasant global triggers, things can only improve," said a fund manager optimistically.

Source: http://economictimes.indiatimes.com/MFs-forced-to-sell-shares-as-inflows-dry-up/articleshow/5655825.cms