Sundaram Fin to buy out BNP in JV

Chennai-based Sundaram Finance Group is set to buy French bank BNP Paribas’ 49.90% stake in their domestic mutual fund joint venture, Sundaram BNP Paribas Asset Management.

The decision comes after the Securities and Exchange Board of India (Sebi) earlier this year asked BNP, which also owns Fortis Mutual Fund here, to limit its exposure to the Indian mutual fund industry through a single entity.

BNP Paribas had bought a stake in Sundaram Finance’s mutual fund in 2005. But, last year, Fortis Mutual Fund came under the French bank’s umbrella after it acquired Belgium-based Fortis Bank’s various international operations, including the domestic mutual fund business.

As rules do not allow one firm to own stakes in more than one Indian asset management companies, market regulator Sebi set a deadline of March 31 for BNP to decide on how it wanted to operate in India’s 36 member-strong mutual fund industry.

While conveying to Sebi the decision to sell its stake in Sundaram BNP Paribas Asset Management, BNP has sought approval to conclude the deal by June, said a person close to the matter. ET could not ascertain how much Sundaram will shell out to buy the stake.

In a response to ET’s email questionnaire, a BNP spokesperson said, “We do not comment on this story. BNP Paribas studies (sic) the various strategic options on the Indian market.” Sundaram Finance officials could not be reached for comment. BNP had the option of selling its stake in Sundaram BNP Paribas Asset Management or push for the merger of Fortis Mutual Fund with the mutual fund joint venture, said another person in the know.

Sundaram BNP Paribas’ merger with Fortis Mutual Fund would have resulted in Sundaram Finance owning a lower stake in the new entity, unless it wanted to pump in more money.

“The thinking in the Sundaram Finance camp has been to buy BNP’s stake (in Sundaram BNP Paribas Asset Management) and own the entire company rather than pump money into an entity where they have a lesser say,” the person in the know said. “Also, there is discomfort at Fortis’s assets being mostly debt,” he added.

Fortis Mutual Fund managed assets worth Rs 7,889 crore, as on March 31. Sundaram BNP Paribas Asset Management managed assets worth Rs 13,877 crore as on March 31. The mutual fund industry had assets under management worth about Rs 7.5 lakh crore in the period. Industry officials said Sundaram Finance will probably look to grow its equity assets under management and look for a partner later at higher valuations.

“Roping in a bank with a wider reach as partner would be a good strategy at a later stage to grow this business (mutual fund),” said a senior official with a private mutual fund.

Source: http://economictimes.indiatimes.com/markets/stocks/stocks-in-news/Sundaram-Fin-to-buy-out-BNP-in-JV/articleshow/5841925.cms

Value Research joins hands with UK-based Financial Express

Mutual fund research firm, Value Research has joined hands with UK-based Financial Express to launch Value Express, a complete solution in investment data management that is designed to help asset management companies (AMC), retail investors and financial advisors to make sound investment decisions, a company statement said here.

Financial Express is UK's number one provider of mutual fund data and analytical tools.

"Value Express would offer an overall holistic approach to data, information management and dissemination that would produce excellent results due to the economies of scale and consistency of approach," Value Research Founder, Dhirendra Kumar told reporters here.

It will also assist the maintenance of existing services in relation to market changes, and the development of future services.

Our partnership with Financial Express will allow us to provide world-class services to the Indian market and its customer-driven approach will enable mutual fund companies of India to achieve higher levels of support and service in a cost-effective manner and with much reduced timescales, Kumar said.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/Value-Research-joins-hands-with-UK-based-Financial-Express/articleshow/5840335.cms

SBI Mutual Fund may get a new owner

SBI Mutual Fund’s ownership may soon see a change, with its shareholder Societe Generale Asset Management merging with Credit Agricole Group’s asset management arm globally earlier this year to form a new entity, Amundi.

SBI owns 63% in SBI MF, while France’s Societe Generale Asset Management owns 37%. Sources said SBI MF, which has assets under management worth around Rs 37,000 crore, has sought Sebi’s approval to effect the change in ownership following the merger. A person familiar with the matter said the change will be only in the name of the shareholder, but will not impact the shareholding pattern.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/SBI-Mutual-Fund-may-get-a-new-owner/articleshow/5837964.cms

Now, mutual fund agents on Sebi’s radar

The Securities and Exchange Board of India (Sebi) is planning to introduce norms to regulate mutual fund distributors, said a top official. The stock market regulator is working with the Association of Mutual Funds in India (Amfi) in this regard and plans to effect the proposed norms from June, said Sebi’s executive director KN Vaidyanathan.

“Distributors have to be regulated and we have given the responsibility to Amfi. Every component of capital market intermediaries need to be regulated,” Mr Vaidyanathan told reporters at a Federation of Indian Chambers of Commerce and Industry (FICCI) conference here on Tuesday.

India’s fragmented mutual fund distribution industry is largely unregulated and has been in shambles since August after Sebi banned asset management companies (AMCs) from charging investors the so-called entry load that was mostly used to remunerate distributors.

The new rule gave very little incentive for distributors to sell mutual fund products. While the larger distributors have been less affected by the move, smaller distributors have taken a severe hit, with many of them even shutting shop.

Now, Sebi along with Amfi, is attempting to put processes in place to train and certify distributors.

“The examination which we (Amfi) initiated in 2000 is now undergoing a change. The exam will now be conducted by the National Institute of Securities Market (NISM),” said AP Kurian, chairman, Amfi. “NISM will now conduct all examinations for market participants in the securities market,” he said.

There are around 65,000 mutual fund agents across the country who have Amfi registration numbers (ARN).

The need to train distributors was mentioned in the Swarup Committee’s consultative paper on investor awareness and protection. The paper emphasised on the pressing need in the market for a regulatory structure for mutual fund, insurance and pension sellers and advisers.

There are 30 lakh plus insurance and mutual fund agents and bank officials (as per Swarup committee estimates) which sell retail financial products in India. Separately, at the FICCI event on Tuesday, Sebi chairman CB Bhave stressed on the need to cut costs in securities market transactions and also said sellers of derivatives products should not ‘indiscriminately sell these products’.

“One should see that products are sold to only suitable investors. We need to keep appropriateness in mind... We should not sell these products indiscriminately to push volumes,” Mr Bhave said.

“Cost of securities market transactions is a challenge. We need to be conscious of cost- cutting in market transactions,” he said.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/Now-mutual-fund-agents-on-Sebis-radar/articleshow/5837944.cms

MFs rediscover the virtues of passivity

With many funds lagging benchmarks, index funds and ETFs become attractive.

Moving away from active management, a clutch of fund houses are planning to launch passively managed funds that include index funds and ETFs (exchange-traded funds).

For the first time, mutual funds (MFs) are showing increased inclination towards passively managed funds after the downturn, when actively managed portfolios were hurt more than index funds.

IDBI Bank, while announcing its MF venture recently, announced it would launch only index funds. “The reason is that they are easy to understand from a retail investor’s perspective and come with lesser expenses than an actively managed fund,” Krishnamurthy Vijayan, CEO of IDBI MF had said at the time of the launch. For a new fund house such as IDBI, it makes all the more sense because costs involved in running the fund are lower.

IDBI is not the only one. Motilal Oswal, which recently got approval to start an asset management business, has filed for a Nifty-based ETF. The underlying index for this is MOSt 50 index, fundamentally an enhanced index based on the S&P CNX Nifty index.

Nitin Rakesh, CEO, Motilal Oswal MF, said, “Markets are becoming more efficient, which makes it all the more difficult to beat the benchmark. With Sebi scrapping the entry load, distributor differentiation for this product has gone. And, the fact that a couple of global players are looking to launch ETFs itself speaks about the importance of this product. ETFs are a huge asset class globally. In India, there is a lot of scope for this product to grow.”

Reliance MF, the largest fund house, has filed for MSCI India Growth ETF and MSCI India Value ETF. These would track the MSCI India index. Sources said a couple of other fund houses, one being Deutsche, are also planning to launch passively managed funds.

Currently, Benchmark MF is the only fund house dedicated to ETFs. It launched a Hang Seng ETF last month and plans to launch an infrastructure ETF.

Experts said a lot of investors became disenchanted with actively managed funds after the market crash as most of them were unable to beat the index. In spite of entrusting their money with professional fund managers, retail investors burnt their fingers, with performance in some cases being worse than the index. According to rough estimates, only 17 per cent funds globally outperform the indices.

“The case for indexing is gaining strength in India if one goes by the numbers. Ten years back, a majority of funds used to beat their benchmarks, but now only 50 per cent funds do that. And, the universe of actively managed funds is so large that it is difficult for investors to figure out which funds are outperforming the indices,” said Dhirendra Kumar, CEO, Valueresearch Online, a fund tracking firm.

Distributors said index funds and ETFs would become more popular once the MF platform of the Bombay Stock Exchange and the National Stock Exchange got active. Currently, although these platforms exist, the number of trades is quite small.

Financial planners and advisors said for somebody with a 10-15 year horizon, index funds made more sense as they would beat actively managed funds due to the lower fee structure. Besides, it gets increasingly difficult to beat the market on a regular basis year after year for a long period of time.

Source: http://www.business-standard.com/india/storypage.php?autono=392426

RBI hikes repo, reverse repo rates & CRR by 25 bps

The Reserve Bank of India on Tuesday raised key interest rates by 25 basis points, as expected, tightening policy for the second month in a row as inflation heads towards double digits.

The Reserve Bank of India also raised its cash reserve ratio (CRR) requirement for banks by 25 basis points, as expected, in a move to drain further liquidity from the financial system. The hike in CRR will suck out Rs 12,500 crore from the banking system. The CRR increase will come into effect from April 24.

India last month became the second Group of 20 economy after Australia, to raise policy interest rates as the world economy recovers from it worst downturn in decades. The central bank surprised markets by raising rates by 25 basis points ahead of this month's scheduled quarterly policy review.

Asia's third-largest economy is set to grow at 8.5 percent in the current financial year and 9 percent the following year, and inflation is spreading beyond food to fuel and manufactured goods such as cars. March annual inflation reached 9.9 percent, its highest in 17 months.

The central bank lifted the reverse repo rate, at which it absorbs excess cash from the banking system, by 25 basis points to 3.75 percent. It increased the repo rate, at which it lends to banks, by 25 basis points to 5.25 percent.

It raised the reserve requirement for banks by 25 basis points to 6.00 percent.

"With the recovery now firmly in place, we need to move in a calibrated manner in the direction of normalising our policy instruments," RBI Gov. Duvvuri Subbarao said in the policy statement.

Malaysia and China are among the developing nations that have begun to use monetary tools to cool their economies. India also raised policy rates unexpectedly on March 19 by 25 basis points as food price increases spilled over to manufacturing that could set off an inflationary spiral.

Industrial output has risen more than 15% for three straight months, wholesale price inflation is at 9.9%, much above the central bank’s raised target of 8.5%, and loan demand is rising, indicating acceleration in economic growth. That has prompted many to forecast a 9% economic expansion this fiscal.

Source: http://economictimes.indiatimes.com/news/economy/policy/RBI-hikes-repo-reverse-repo-rates--CRR-by-25-bps/articleshow/5834930.cms

Religare MF unveils two monthly income schemes

Religare Mutual Fund has come up with two new funds, including Religare Monthly Income Plan (MIP) Plus, which will come with an exposure to gold. The other fund is a traditional monthly income plan. Both the new fund offers will close on May 11. Under MIP Plus, investments will be made in gold through gold exchange-traded funds (ETF), in addition to fixed-income instruments and equities.

The fund will invest a minimum of 65% of its assets in debt and money market instruments, while at least 10% of the assets will be invested in Gold ETFs (exposure in the range of 10-35%). The fund, which seeks to generate moderate capital growth, will invest up to 25% in equity and equity-related assets. The fund is benchmarked against Crisil MIP Blended Index and price of gold.

The stated investment objective of the traditional MIP is to generate regular income through a portfolio of predominantly fixed-income securities, with a small exposure to equity and equity related instruments. For both the schemes, the minimum application amount during NFO under the growth option is Rs 5,000, while it is Rs 25,000 under the dividend option.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/Religare-MF-unveils-two-monthly-income-schemes/articleshow/5833933.cms

Credit Opportunities Fund from Kotak Mutual

has announced the launch of Credit Opportunities Fund, an open-ended income scheme. As per its scheme information document, the investment objective of the scheme is to generate income by investing in debt and money market securities across the yield curve and credit spectrum.

The new fund offer, which opened for subscription on April 12, will close on April 30. Exit load specified under the scheme is 2%, if the investor redeems/switches-out within one year from date of allotment, and nil after one year. The minimum application amount prescribed by the fund house is Rs 5,000.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/Credit-Opportunities-Fund-from-Kotak-Mutual/articleshow/5833942.cms