Tata Mutual Fund launches Tata Gilt Mid Term Fund

Tata Mutual Fund has launched, a new open ended debt scheme, Tata Gilt Mid Term Fund. The new fund offer would remain open from 20th May, 2010 to 17th June, 2010. The scheme will seek to provide reasonable returns and high liquidity to the unit holders by investing predominantly in Government Securities having residual maturity up to 15 years. The scheme will offer growth and dividend option to its investors.

Source: www.karvymfs.com

M R Mayya joins L&T MF as independent director

M R Mayya, a well-known finance professional and former executive director of Bombay Stock Exchange (BSE), has been appointed as an independent director on the board of L&T Mutual Fund Trustee Limited with effect from May 17, 2010.

Mayya, an MA in Economics from Madras University was also founder chairman of BOB Capital Markets. After completing his MA, Mayya entered into the Indian Economic Service in July 1958, and served about 18 years in the Forward Markets Commission regulating commodity markets.

He joined the stock exchange division of the Ministry of Finance regulating stock markets in February 1973. He became the head of stock exchange division in August 1978. He joined Bombay Stock Exchange as an executive director in August 1983 and after working for about 10 years, he retired in August 1993.

With his vast knowledge and experience, Mayya was appointed as the Member of the Rating Committee of CARE for over 14 years till January 2008. He has also been Director of various Companies.

Commenting on Mayya joining the trustee company, N Sivaraman Sr VP L&T Finance, the sponsor of L&T Mutual Fund Trustee Limited said, “We are proud to have Mr. Mayya, a legend in the financial Services in India on the Board of L&T Mutual Fund Trustee Limited. His guidance will be valuable to us in building a robust mutual fund business”.

L&T Mutual Fund manages 11 equity schemes and 11 debt schemes.

Source: http://www.business-standard.com/india/news/m-r-mayya-joins-lt-mf-as-independent-director/95172/on

IDFC mutual fund seeking foreign ally

At present, seven of the top 10 fund managers in the country are in the form of joint ventures

The asset management arm of Infrastructure Development Finance Co. Ltd(IDFC) is looking for a strategic foreign partner that will give it access to an overseas distribution network, enable it to build an international presence and tap investors abroad.

Discussions are under way with several potential overseas partners for IDFC Asset Management Co. Pvt. Ltd, IDFC executive director Vikram Limaye said in a phone interview.

“I don’t know in what shape and form the partnership will evolve, and there could be an arrangement of the partner taking a minority stake in the company,” he said.

IDFC Asset Management wants a foreign partner that will help it tap a share of the capital that flows into the Indian market, boosting its fee income and improving its margins.

“Domestic mutual funds do not have the international distribution, brand or relationships to intermediate international capital flows into the Indian markets from an investment management perspective,” Limaye said.

In January, Baltimore, US-based asset management firm T. Rowe Price Global Investment Services Ltd agreed to buy a 26% stake in UTI Asset Management Co. Pvt. Ltd for $140 million (around Rs655 crore today). At the price, UTI Asset Management was valued at around Rs2,500 crore.

At present, seven of the top 10 fund managers in India are joint ventures (JVs), with the local partners holding a controlling stake in each of them. Franklin Templeton Asset Management (India) Pvt. Ltd is the only 100% foreign-owned asset manager among the top 10.

Kotak Mahindra Asset Management Co. Ltd is the only one among the larger asset managers without a foreign partner.

Foreign joint venture partners help get significant overseas funds to manage for local ventures, said N. Prasad, an independent consultant and a former chief investment officer at Sundaram BNP Paribas Asset Management Pvt. Ltd.

“Though the fee is lower, it goes direct to the bottom line as there are no marketing costs for the JV. In contrast, though you get a higher fee on the local money, you end up spending a bulk of it in brand building and marketing activities,” he said.

IDFC Asset Management started operations by acquiring Standard Chartered Plc’s asset management business for Rs830 crore in March 2008. Standard Chartered had assets of Rs14,141 crore under management.

Joint ventures are mutually beneficial for foreign and local asset managers, said Sudeep K. Moitra, chief distribution officer of Anagram Stockbroking Ltd.

“While foreign players get a share of the growing Indian market, the local players get access to international management practices, fund management processes and control mechanisms,” Moitra added.

In the past two years, IDFC Asset Management has almost doubled its asset base. At the end of April, it managed in excess of Rs26,000 crore, making it the 10th largest asset manager in the country.

India has 38 asset management companies that handle a total Rs7.7trillion.

On Thursday, Pramerica Asset Managers Pvt. Ltd, a unit of US-based Prudential, said it received regulatory approval to start operations, becoming the 39th.

Reliance Capital Asset Management Ltd, HDFC Asset Management Co. Ltd and ICICI Prudential Asset Management Co. Ltd are the top three fund houses in India.

Mutual fund valuations peaked when Eton Park Capital Management paid 12.9% of assets for a 5% stake in Reliance Capital Asset Management in December 2007.

After the market decline of 2008, valuations have plunged.

In July, Nomura Asset Management Co. Ltd picked up a 35% stake in LIC Mutual Fund Asset Management Co. Ltd for 2.4% of total assets.

In September, the financial services unit of engineering firm Larsen and Toubro Ltd announced plans to buy DBS Cholamandalam Asset Management Ltd for Rs45 crore, valuing the firm at about 1.6% of its assets under management.

Profit margins of asset management companies have come under pressure. A ruling by the capital markets regulator, Securities and Exchange Board of India, had restrained fund houses from charging upfront commissions for mutual fund investments starting August.

A study by consultancy firm McKinsey and Co. said that asset management companies would see profit erosion in fiscal 2010 and 2011.

“The industry is likely to witness consolidation as smaller AMCs (asset management company) may not be able to accommodate the acute profit and loss stress,” the study added.

Source: http://www.livemint.com/2010/05/20233817/IDFC-mutual-fund-seeking-forei.html?h=A1

Take a SIP to cut your lump-sum investment risks

All financial advisors worth their salt will recommend that a systematic investment plan (SIP) route is the time-tested, sure-shot way of making returns from investment in equity mutual funds.

This, of course, makes sense when the underlying trend is upward, as no one wishes to put money in a losing cause. The current European crisis will result in your getting jittery and wanting possibly to stop your regular SIP investment. My simple advice to you is: Don’t.

Since the start of this calendar year, the 50 stock Nifty has moved down 500 points in the first five weeks (from 5,200 levels to 4,700 levels in early February), only to rise by 650 points in the next two months, followed by a 350 point fall in the past four weeks.

In fact, at current levels of 5,000 Nifty, we are at the same point that we were in September/October 2009. Hence, an entrant into the stock markets in end September 2009 has made nil returns in the past nearly eight months.

SIP explained

If you think of a SIP as opposed to a gulp, you will realise that a SIP is different from a lump-sum entry into a mutual fund. Since equities are a volatile class of asset, we normally use SIP in equities. However, this option can also be utilised for entry into debt. In fact, SIP is an ideal method to average out the entry levels with the objective of reducing risks of lump-sum investments.

Back testing some recent data

While the intention of investing in equity funds is for the long term, it is always useful to see how the discipline of SIP would have benefited you, the investor, in the recent past.

For this, I have assumed that you could have invested in two equity funds — one, a large-cap fund and the other, a mid-cap scheme, on a weekly basis (Rs 1,000 each week) from July 2009 and the values are as of May 17, 2010.

As you will see from the table (above), the mid-cap scheme has comfortably beaten the large-cap one, but that’s a wrong way to compare schemes. It may be more prudent to see how the scheme has performed versus its self-proclaimed benchmark.

Cutting the emotional aspect from investing

If you can cast your eye back to the period that we are referring to, there would have been times when you would have been jittery to write out your investment cheque. For investing in a SIP, you need to write out your first cheque, and then issue instructions for an auto debit from your bank account.

Operationally, it works just like payment of the EMIs, and ensures that you do not have a bloated bank account. So, while international markets shiver and India will catch some bit of a cold, investing through an SIP in equity mutual funds will ensure that I am not left out of the equity markets.

After all, the long-term for Indian equities does seem rosy and we would want to continue participating in the upsides through the SIP route.

Source: http://economictimes.indiatimes.com/personal-finance/savings-centre/analysis/Take-a-SIP-to-cut-your-lump-sum-investment-risks-/articleshow/5955971.cms

Pramerica to launch India fund business in June

Pramerica Asset Managers, the Indian arm of U.S.-based Prudential Financial said on Thursday it has received regulatory approval to launch mutual funds in the domestic market.

"Pramerica Mutual Fund will soon file products for SEBI approval and hopes to launch its first product by the end of June," it said in a statement.

Pramerica joins the likes of Italian bank UniCredit's arm -- Pioneer Global, South Korea's Mirae Asset, France's Axa and Japan's Shinsei, who have started operations in India's fiercely competitive fund industry over the last three years.

Many more, including German firm Allianz and South African financial services firm Sanlam, are considering an entry into the Indian market, forecast by the Boston Consulting Group to manage $520 billion by 2015.

Indian mutual funds industry managed assets worth 8.1 trillion rupees ($174 billion) at the end of April, data from the Association of Mutual Funds in India showed. ($1=46.5 rupees).

Source: http://in.reuters.com/article/fundsNews_DUP1/idINSGE64J0B120100520

Time to evolve new MF investing styles

Just like the advent of the automobile changed the growth pattern of cities, the financial crisis of 2008 has, in all likelihood, changed the growth pattern of the world forever

I started the year wishing our markets a normal year, in the process hoping that this gives us the opportunity once again to believe that no one and nothing else but we ourselves control our destiny.

Just like the advent of the automobile changed the growth pattern of cities, the financial crisis of 2008 has, in all likelihood, changed the growth pattern of the world forever. The emerging world is the increasingly accepted new “growth” driver. And India is confidently ascending the charts in making realize that dream. And why not? With the second fastest capital market recovery worldwide in 2009, a largely social and risk-averse banking system that stayed virtually insulated from the profits-at-all-costs model of the West, a compelling gross domestic product growth forecast of 8.2% with an upward bias for 2010, a just-in stable majority government at the Centre, the overall feeling of economic optimism in India is justifiably at its peak.

We as Indians are sub-consciously beginning to feel that we have started to “regain” our pole position (acceded just 200 years ago to the West) of economic dominance of our planet. With that preamble, I am happy to argue that the start to 2010 for us asset managers has been healthy.

January was the first month since August to see positive net inflows in the industry. A forward looking strategic shift by the regulator towards greater transparency which banned commissions from asset management companies (AMCs) to distributors in August (possibly the first country to do so) with just 30 days given to change, did baffle both participants. But it seems that distributors have since recalibrated their business models and have begun to implement it in the new year.

Investors may just have started seeing and even liking the more “need-based” recommendations from their advisors. If this hypothesis is right, then 2010 will start a long-term journey towards higher retail participation and stickier assets, which, over time, is tremendously healthy for the growth and stability of our capital markets.

On the other hand, despite this major regulatory change, asset managers have chosen to continue to pay distributors (albeit lower) from their own pockets. A “rank” race among the bigger players has modelled this structural disconnect. It is unlikely that they will “decouple” from this habit this year. Rehabilitation may need up to two years. This will, in turn, shrink AMC profitability per dollar of assets in 2010. An unsuspecting causality will be advertisers, who will not see the mega marketing spends as a result.

Interestingly, this has still not deterred as many as 23 aspirant asset managers (global and local firms alike), who are eagerly waiting to start shop. Consolidation, hence, is inevitable. Besides, existing players may dilute ownership to raise capital as sponsors may not be that forthcoming. US-based T Rowe Price bought a 26% stake in January into India’s fourth largest asset manager. This trend is likely to gain momentum in 2010. This is healthy for long-term sustainable growth of the industry.

As for the Indian investor in 2010, or should I say starting 2010, I am hopeful that they will open up to “innovation” in investing styles. They seem ready for an “upgrade”. For 15 years, they have invested primarily with fundamental managers. To that, quantitative style of investing seems to have made a confident beginning. The argument for disciplined investing sans emotion has found feet. A handful of players have already or are set to launch products using quantitative styles.

Recent successes show that investors are likely to adopt these as much-needed compliments to their portfolios—slowly, but surely. Separately, there is a small undercurrent arguing for investing now in global markets. Multinational banks as thought leaders in advisory have in fact begun training and have tasked their teams to seed client portfolios with global products. The intention here is not to enhance returns but to demonstrate benefits in lowering risk from diversification. Over time, as investors adopt this logic, multinational AMCs will benefit faster than those who stay local.

It is often said that time is a dressmaker specializing in alterations. We will have to adapt to the evolving view rather than work towards one that is preconceived. That is the new future.

Navin Suri is managing director and CEO, ING Investment Management India.

Source:http://www.livemint.com/2010/05/19215308/Time-to-evolve-new-MF-investin.html

Surprise: MIPs raked in big bucks since August

“Sebi killed the mutual fund,” fund houses would have us believe, off the record.

Can’t grudge them that.

After all, since August 1, 2010, when the no-entry-load regime took effect, equity mutual funds have seen an outflow of Rs 7,970 crore, with monthly redemptions far exceeding inflows on seven out of nine occasions.

“No commissions on offer, so agents are not selling,” goes the industry refrain.

But if this was indeed true, how come the monthly income plans (MIPs) offered by the same mutual funds have been selling like hot cakes?

As on July 31, 2009, the assets under management of 41 MIPs stood at Rs 4,832 crore.

That’s up a whopping Rs 12,425 crore from Rs 17,257 crore on April 30, 2010, the last time the numbers were declared. Take out the Rs 425 crore or so generated as returns and MIPs have still seen an inflow of around Rs 12,000 crore since the MF industry went no-load.

MIPs are hybrid investment products that invest the bulk of their assets (75-95%) in debt and money market instruments and the balance in equities.

The debt investments ensure stability and consistency, while the equity portion boosts the returns.

These funds are suited for conservative investors who are looking

for slightly better returns than bank fixed deposits or pure debt fund offerings. The name MIP, though, is a misnomer because these plans do not guarantee a monthly income and it is merely a hangover from the days of the assured-return schemes offered by the erstwhile Unit Trust of India.

“The returns last year have been good in these hybrid products, aided by equity markets’ surge. This back-view mirror approach has prompted many of the retail investors and HNIs to go for MIPs,” said Surajit Misra, executive vice president & national head - mutual funds, Bajaj Capital.

“MIPs have seen favour with investors as they offer a little more than normal debt or fixed income products because of addition of equity component, which may give higher returns in favorable market conditions. At the same time, lower equity exposure prevents capital erosion in uncertain times” said Satyabrata Mohanty, head - mixed asset investment, Birla Sunlife Mutual Fund.

With equities at the upper end of valuations and future short-term

performance uncertain, investors have lately been cautious in investing in pure equity schemes.

“Investors are wary of investing in pure equity products because of extreme choppiness in the markets after they ran up too fast. The MIPs offer capital protection in terms of investing in short-term debt instruments, which give 6-7% kind of annual returns,” said Ritesh Jain, head - fixed income, Canara Robecco.

MIPs have given an average return of 11% over the last one year, as on May 14, 2010. During the same period, fixed deposits (FDs) have given a return of around 7-8% before tax. The post-tax return on FDs would thus be even lesser.

In case of MIPs, the long-term capital gain (for any holding of one year or more) is taxed at the rate of 10% without indexation or 20% with indexation, whichever is higher. Indexation allows the investor to take inflation into account while calculating his cost of purchase. This ensures that the post-tax return of MIPs is around 8%, whereas the post-tax return of an FD for an investor in the 30% tax bracket would be around 5-5.5%.

Going forward, experts believe that with the equity markets remaining volatile and interest rates rising, the returns on MIPs may reduce to more normal historical levels of around 8%.

“The rising interest rates would affect the debt investment returns. The best part for these MIPs seems to be over and the inflows may slow down in next 2-3 months. Investors with horizons of 2-3 years can expect to receive 8-10% returns hereon,” said Misra.

The key takeaway, however, is that mutual funds have been able to push MIPs even without entry loads. So, when the time is right, they may be able to push equity funds, too.

Source: http://www.dnaindia.com/money/report_surprise-mips-raked-in-big-bucks-since-august_1385214

Canara Robeco launches InDiGo Fund

Canara Robeco Asset Management Company today announced the launch of its Canara Robeco InDiGo Fund, an open-end debt scheme.

The objective of this fund is to generate income from a portfolio constituted of debt and money-market securities along with investments in gold ETFs, a press release issued here stated.

The new fund offer is open for subscription from May 19 and will close on June 10, the release said.

The scheme will invest a minimum of 65% and a maximum of 90% in Indian debt and money market instruments, a minimum of 10 per cent and a maximum of 35% in gold ETFs.

Ritesh Jain, Head-Fixed Income is the fund manager for this scheme.

Canara Robeco AMC's CEO, Rajnish Narula, said that "Canara Robeco InDiGo Fund focuses on gold...it keeps the purchasing power intact, protects against weakening of the US Dollar, less volatile than equities and valued as a savings/investment tool."

"The combination of fixed income and gold aims to provide enhanced yield without additional duration/credit risk," he added.

Source: http://www.dnaindia.com/money/report_canara-robeco-launches-indigo-fund_1384973