PSU fund houses score over pvt biggies in asset growth

Public sector mutual fund houses account for just a fifth of the total assets under management (AUM). But in relative terms, they have had a better run, compared to their private sector counterparts in 2009-10, when industry-wide assets grew 47% to Rs 6,13,979 crore. A similar trend was witnessed the year before, too. This indicates a preference for public sector fund houses in the period, following the crisis in financial markets in 2008.

Of the 38 fund houses which are currently operational in the country, only six funds houses — Unit Trust of India, Life Insurance Corporation, SBI Magnum, Baroda Pioneer, Canara Robeco and Principal PNB — can be categorised as those falling under the public sector, implying a ratio of 84:16 between the private and the public sector mutual fund players. It is no surprise then that private sector fund houses account for a predominant share of the assets

under management.

According to Sebi data, private players together accounted for about 78% of the industry wide assets under management at the end of financial year 2009-10. This is two percentage points lower than their market share in the preceding year.

If one were to consider the growth in assets over the past few years, private players clocked a 59% growth in their assets during the bullish phase of 2007-08. This was followed by a decline of more than 19% the following year when markets across the globe sold off. The rebound in 2009-10 led to an increase of about 43% in their assets last year.

In case of public sector fund houses, a growth of about 39% in the asset base in 2007-08 was followed by a decline of about 9% in the meltdown year of 2008-09. However, during the recovery phase of 2009-10, the assets of the public sector fund houses have jumped by nearly 66%. This is the highest in the past six years. In absolute terms, the public sector fund houses have seen their assets grow from Rs 82,000 crore in 2008-09 to more than Rs 1,35,000 in 2009-10.

Among the public sector fund houses, the largest percentage rise in the average assets under management during the period April ‘09-March ‘10 was accounted for by Baroda Pioneer (90%) followed by LIC which saw its assets rise by about 62%. Interestingly, both Baroda Pioneer and LIC have a higher proportion of debt assets compared to equity assets.

These statistics reflect investors’ changing preference for public sector mutual funds vis-à-vis the private sector ones. Industry officials says the collapse of some of the biggest names in the private sector financial organizations globally in 2008, could have partly contributed to this trend.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/analysis/PSU-fund-houses-score-over-pvt-biggies-in-asset-growth/articleshow/5823322.cms

SEBI - IRDA spat: Financial literacy will follow

Fish or fowl? What are ULIPs (unit-linked insurance products)? For all the brouhaha over ULIPs last week, the answer is, and always has been, neither! Yet judging by their phenomenal popularity, investors neither knew nor cared! Since they first came on to the scene about a decade ago, ULIPs have enjoyed a rare success.

One can try and hypothesise why: as a part insurance product, part savings product, maybe they fulfill a felt need. Maybe they epitomise the Indian attitude to life in general – a little of this, a little of that and not too much of anything! How else can one explain our fondness for Khichdi or Avial!

Consider. In 2008-09 as many as 7.03 crore ULIPs were sold for a staggering Rs 90, 645 crore (close to 1.3% of the country’s GDP!) while during the last financial year alone (April- February) another 16.7 lakh ULIPs were sold.

All the more reason why the very public spat between the capital markets regulator, the Securities and Exchange Board of India (SEBI) and the insurance regulator, Insurance Development and Regulatory Authority, (IRDA) last week is puzzling. Remember, the present product has been in existence for almost 10 years and an earlier avatar, ULIP 71, a UTI (Unit Trust of India) product with a term cover from LIC has been in existence since 1971.

Needless to say there are a lot of theories floating around. These range from the usual turf-battle theory to regulatory capture of SEBI by a mutual fund industry,(incensed at its business being hit with the whittling down of MF agents’ commissions, even as insurance agents, riding generous commission push ULIPs ever harder), to the more conspiratorial one that sees the hand of the finance ministry in using the spat as a ploy to push through its pet project of a Financial Stability and Development Council to upstage the present High Level Committee on Capital Markets, headed by the Reserve Bank of India .

As with all such theories they will have to remain conjectures. We will now have to await the final outcome of either the court case or perhaps an out-of-court compromise between the two regulators. But what is noteworthy is all this is not the minutiae of the spat but an entirely unintended consequence: overnight investor education!

For years, financial market regulators have been trying to get ordinary investors to take informed decisions when choosing between different financial products. In vain! Whether it is investment in the stock market or investment in an insurance or pension product, few investors care to do any homework before investing, relying instead on ‘tips’. Indeed it is doubtful if many ULIP holders were even aware how much of their money goes to buy insurance and how much is a pure play on the stock market.

Not any longer! After last week’s unseemly spat, triggered by an ill-judged attempt by to force the issue, a whole lot of investors who in the past had never cared to figure out what they were buying, are now wising up. Companies and agents say they are deluged with inquiries. And that is the best outcome of the spat.

Ultimately the storm will blow over but the financial literacy gained will stand investors in good stead. For many investors in ULIPs it might be a costly first lesson but it is unlikely to be one that they will forget easily. At the end of the day, it matters little to ordinary investors whether a product they buy is regulated by X or Y. What matters is that it is properly regulated and there is transparency. So whether SEBI ‘wins’ or IRDA wins, what is essentially a petty turf war is immaterial as far as they are concerned.

The lesson they need to take home is that there is no alternative to financial literacy. The job of the regulator (any regulator) is to frame rules and ensure all players play by the same rules and also make sure there is complete transparency. Once that is done, it is up to the investor to take his own decisions. And live with the consequences!

It is not the job of the regulator to ‘protect’ a man from his own ‘folly’. Not only because what is folly to one may be eminently sensible to another but also because it is not the regulators job in the first place. As financial products become more and more complex, investors need to remember that when it comes to their savings, they must be their own masters!

Source: http://economictimes.indiatimes.com/Opinion/Columnists/Mythili-Bhusnurmath/SEBI---IRDA-spat-Financial-literacy-will-follow/articleshow/5826614.cms?curpg=2

Principal MF's six schemes join NSE order routing platform

Principal Mutual Fund has announced that with effect from 19 April 2010 six schemes of the fund house have been admitted on the order routing platform of NSE, enabling investors to submit applications for subscription and redemption there under. The schemes are:

Principal Emerging Bluechip Fund-an open ended equity scheme

Principal Large Cap Fund- an open ended equity scheme

Principal Monthly Income Plan-an open ended fund

Principal Monthly Income Plan-MIP Plus- an open ended fund

Principal Personal Tax Saver Fund-an open ended equity linked savings scheme

Principal Tax Saving Fund- an open ended equity linked savings scheme

Purchase/redemption of units will be available to both existing and new investors. Currently switching of units, systematic investment plan, systematic transfer plan, and systematic withdrawal plan will not be permitted through this facility.

The units of eligible schemes are not listed on NSE and the same cannot be traded on stock exchange like shares. The window for purchase/redemption of units on NSE will be available between 9am to 3pm or such other timings as may be decided. Investors have an option to hold units in physical form or in dematerialized form.


Source: http://www.apollosindhoori.cmlinks.com/MutualFund/MFSnapShot.aspx?opt=9&SecId=10&SubSecId=22,24

Reliance Mutual Fund revises scheme name

Reliance Mutual Fund has announced the revision of scheme name of Reliance NRI Income Fund to Reliance Dynamic Bond Fund. The revision will be effective from 21st May, 2010. All other features of the scheme will remain same. Reliance NRI Income Fund is an open ended income fund with investment objective to generate optimal returns consistent with moderate levels of risks. This income may be complimented by capital appreciation of the portfolio. Accordingly, investments shall predominantly be made in debt instruments. The scheme is managed by Mr. Prashant R. Pimple and is benchmarked against Crisil Composite Bond Fund Index.

Source: News Source - MUTUAL FUND INDIA./ www.karvymfs.com

Reliance MF announces changes in Reliance Banking Fund.

Reliance Mutual Fund has announced that with effect from May 21, 2010, the following changes will take place in Reliance Banking Fund, an open ended banking sector scheme.
Revised: Definition of banking sector: Banking sector includes all companies as defined in the Banking Regulations Act, 1949 and the RBI Act, 1934 as amended from time to time. Investment objective: The primary investment objective of the scheme is to seek to generate continuous returns by actively investing in equity and equity related or fixed income securities of companies in banking sector.

Source: http://www.karvymfs.com/

MFs record Rs 83,081 cr net inflow in FY10

The domestic fund market registered positive net inflows in 2009-10 due to an improved economic condition and easy availability of liquidity in the system.

The mutual fund industry witnessed a net inflow of Rs 83,081 crore as against a net outflow of Rs 28,297 crore in FY09. According to latest data from the Association of Mutual Funds in India (AMFI), debt funds saw the highest net inflow of Rs 96,578 crore as against an outflow of Rs 32,168 crore in the previous financial year.

The assets under management as on March 31, 2010, stood at Rs 6,13,979 crore compared to Rs 4,17,300 crore last year — a rise of 47.13 per cent.

Rajiv Anand, CEO of Axis Mutual Fund, said, “Growth in the fund market is because of easy liquidity throughout the year and increase in investments by banks.” Companies pumped in a significant amount of money.

Echoing Anand’s views, the Chief Investment Officer at Shinsei Mutual Fund, N Sethuram, said, “There have been significant inflows into money market funds with huge contribution from banks. Companies also contributed as they scaled down capex plans.”

However, equity schemes could not garner much despite a market rally of close to 80 per cent. The ban on entry load on equity schemes imposed by the Securities and Exchange Board of India (Sebi) was a major setback.

The equity category saw a net inflow of Rs 595 crore this fiscal as against Rs 1,056 crore in FY09 — a decline of 43.64 per cent.

“In view of the rally in equity markets, net inflows into equity schemes was negligible, primarily due to Sebi’s entry load ban effective from August 1, 2009. Moreover, investors’ confidence in equity markets came only when Sensex was around 14,000, and after that the rally was steep and time elapsed fast,” said Sethuram.

Fund players expressed optimism about inflows into the equity segment in the current financial year on the back of building up of confidence in equity markets. “As markets today are relatively stable, confidence is back. We expect the year to see good inflows into equity and more retail participation,” said Sethuram.

According to Anand, investors used the rally to exit, as many of them had got stuck during the 2007-08 meltdown. “Liquidity tightening measures are likely to keep inflows into money market funds subdued in FY11.”

During the year, equity-linked saving schemes posted a net inflow of Rs 1,554 crore, a dip of 47.64 per cent, as against a net inflow of Rs 2,968 crore in the previous year.

In 2009-10, the fund industry saw a net outflow of Rs 1,62,165 crore. The largest outflows were reported in income funds (Rs 1,64,487 crore) followed by equity schemes (Rs 2,016 crore), fund of funds investing overseas (Rs 107 crore) and balanced funds (Rs 40 crore).


Source: http://www.business-standard.com/india/storypage.php?autono=391665

Sunil Singhania | We want to be among the few who can time the market

Fund houses probably will have to spend some more to hire a few more people to ensure that no firm, in which they have invested, is missed out, says Reliance Capital Asset Management Ltd, executive vice president Sunil Singhania.

India’s largest mutual fund (MF) house, Reliance Capital Asset Management Ltd, is not just known for its size and scale but also for its active management. Sunil Singhania, executive vice-president and one of the longest serving equity fund manager of the firm, talks about his management style and other key issues. Edited excerpts:

After a few months of net outflows, are you seeing investors returning to MFs?
Last two to three years have been very challenging. Markets crashed globally. Unfortunately, by the time investor confidence returned, the market had shot up. Then came regulatory changes, such as ban on entry loads. Though in the long term these would be very good, in the short term they’ve created a void because most distributors are not willing to sell MFs.

But there is a lot of retail investors’ unsatiated appetite for MF investing. In the last two years, Indian retail investors would have saved at least $500 billion, roughly Rs22 lakh crore. That is equivalent to 25% of household savings every year. So, in two years, you have saved 50% of India’s GDP (gross domestic product). Nothing of that has come into MFs or even directly into the equity markets. I think it’s a matter of time before investors come back to the equity market.

Why haven’t we seen leading firms, such as Reliance MF, speak up against this disparity in regulation on funds and insurance? Is it because these MFs have sponsors who also have insurance firms?
Look at it this way. When I am working for Reliance MF, I am naturally more concerned about my company. That would be true for all asset management companies. So, it is not true that the MF industry is not speaking out against competitive products. Amfi (Association of Mutual Funds in India) has been very vocal on this. You’ll read newspaper reports about other fund houses speaking out too. On the back of Sebi’s (Securities and Exchange Board of India) new rules for the MF industry, the Insurance Regulatory and Development Authority (Irda) has started taking steps, such as putting a ceiling on the expense ratio.

Eventually the investor will understand what’s good and what’s bad for him, irrespective of what the industry and/or regulators do.

You actively dabble in cash and don’t hesitate in sitting on a high levels of cash. Why?
Our cash holdings have gone down of late. People say that it is difficult to time the market and only a few can do it. We would like to be one of the few. Also, when an investor gives us money to manage in full faith, it is our duty to try and do our best.

We don’t want to say that our funds fell because the markets fell. So, as per our understanding of the market, we try to negate the impact to some extent by increasing our cash levels. That helps us in two ways. One, it protects the downside to some extent. Two, in a panic situation, cash comes in handy to buy stocks in depressed markets where there are distressed sellers, such as at the beginning of 2009. As long as we have a view that we should take a strong cash call, we’ll continue to do it. We can go up to 20% in cash, though under normal market conditions, we hold 5-10% in cash. And that is a strategy.

Reliance MF launched some diversified equity funds at a time when it had a substantial cash portion in other equity funds. What was the logic of the launches when you still had to deploy that cash?
That doesn’t matter. When our schemes have cash, the fund manager has the freedom to invest whenever we spot opportunities. In February 2009, when markets were at the bottom and when small stocks were available at throwaway valuations, we wanted to launch a small- and micro-cap fund. By the time we got Sebi’s permission, the markets and these stocks shot up 4-5 times. We did not launch the fund. But I can’t invest the cash of Reliance Growth Fund, our mid-cap-oriented fund, in these tiny companies. It is over Rs7,000 crore and too large. Or, say, in natural resources firms.

Sebi has ruled that fund managers would get more active in protecting the interests of minority shareholders. Is this going to be an operational hassle or a good move?
It’s a good initiative. In fact Irda should also make it compulsory for insurance firms. Any fund house that sees itself as a rational investor should do it. Fund houses may have to spend some more to hire a few more people to ensure that no firm, in which they have invested, is missed out. But it’s a good move.

Source: http://www.livemint.com/2010/04/11205920/Sunil-Singhania--We-want-to-b.html

SEBI Begins ULIP Crackdown; Blocks all activity on existing products

In what promises to become one of the most significant actions ever undertaken by the regulator, SEBI has blocked 14 private insurance companies from promoting and selling ULIPs, as well as collecting fresh premium payments from existing ULIP customers. This action, affected through a detailed 11-page order issued by wholetime SEBI Member Prashant Saran last night, effectively blocks these insurance companies from selling or promoting ULIPs immediately.

The action follows notices issued by SEBI to all insurers in December and January. The order analyses in detail the replies given b
y insurance companies to those notices.

ULIPs are combined investments and insurance products that are a mainstay of the insurance companies. Generally, the investment part predominates and there is a tiny insurance part which has so far enabled insurance companies to circumvent securities laws. This point, that the insurance component is generally very small, is discussed in detail in the order.

The order applies to all existing ULIPs and future ULIPs. Some news reports, which have been widely quoted in other news media, have said that the fate of existing products is not clear. However, the order clearly applies to all existing ULIPs. Under this order, as of now, soliciting of money for fresh investments in ULIPs, promoting existing ULIPs in any way, as well as accepting fresh premium payments of existing ULIP accounts has clearly been blocked. The order is unambiguous on all these points. Here's the exact language in the order: "I hereby direct the entities mentioned in para 1 of this order not to issue any offer document, advertisement, brochure soliciting money from investors or raise money from investors by way of new and/or additional subscription for any product (including ULIPs) having an investment component in the nature of mutual funds, till they obtain the requisite certificate of registration from SEBI. This order is without prejudice to any action that might be taken by SEBI in respect of offer documents or advertisements issued by these entities for products (including ULIPs) having an investment component in the nature of mutual funds launched so far."

Value Research has always considered ULIPs to be a fraud that is being pulled on ordinary Indians and welcomes SEBI's move. There is no doubt that IRDA (Insurance Regulatory and Development Authority) and the insurance companies will fight hard to keep ULIPs the way they are. However, the logic explained in SEBI's order is sound, and there's little doubt that the investment component of ULIPs should be regulated like any other investment product.

Source: http://new.valueresearchonline.com/story/h2_storyView.asp?str=101346