More foreign investors prepared to invest long term in India

Regulatory changes will place the Indian mutual fund industry in a better shape, but it might take time for fund houses to adapt to those changes, Stewart Edgar, chief executive officer (Asia- Pacific) at BNP Paribas Investment Partners, said in an interview. Edited excerpts:

What is your outlook for the growth of mutual fund industry in India, after a spate of regulatory changes that has led to a shrinking of the asset base?

I think we will gradually see assets growing. Mutual fund business is cyclical. But in growing markets like India, you could look five years ahead and expect yourself to be in a better position. And I feel the last few years have been good by shaking out people who were not prepared to stay for the long term and also in terms of forcing people to think about their long-term strategy.

It is actually a good time to be in India because there is a lot of regulatory change and a lot of them, we welcome.

You can always debate the speed of those changes, but as and when asset management companies absorb those changes, the industry will be in a better shape than before. We are not into the new era yet, and it might take two or three years for us to reach where we need to be.

There is a view in India that we have far too many product offerings from asset management companies and there is enormous mis-selling because of that. What do you think?

I think it is a bit difficult to judge the right number of products because it depends on how you define a product. In case of a vast country like India, where needs of clients could be different, I don’t think products themselves should be limited in number; rather products should be designed to suit particular needs.

The key for me in all markets is that the distributor needs to take huge responsibility in making the client understand what a product does and what it does not do.

Some regulators in Asia-Pacific have been slow to recognize the difference between what a distributor does and what an asset manager does.

The market rally this year has mostly been led by foreign investors, with local investors in India being net sellers in most of the months. How do you view this divergence?

This is not something unique to India, we have seen this happen in other markets like Indonesia and China, where locals have bought when the market dipped and sold when it rose, with foreigners on the other side of the trade.

As far as the foreign interest is concerned, I think that is fairly strong and there are more foreign investors who are prepared to make long-term equity investments in India than before. And when local investors realize that the foreign investors are here to stay, we might see a convergence in the views of both local and foreign investors.

For instance, in the rally in Indonesia, for the first six months or so, foreign investors largely led while local mutual funds saw redemption.

However, now people realize that you can’t keep selling and you need long-term exposure to equity, and I think a similar story will play out for India as well.

Source: http://www.livemint.com/2010/12/03210327/More-foreign-investors-prepare.html?atype=tp

Shinsei MF to be renamed as Daiwa MF

Shinsei Investment, Rakesh Jhunjhunwala and Freedom Financial Services (P), the current shareholders of Shinsei Asset Management (India) (P) (the AMC), the investment manager of Shinsei Mutual Fund, have entered into an agreement with Daiwa Securities Group (DSGI) and Daiwa Asset Management Co. (DAM), the parent company of DAM.

Pursuant to the agreement, DAM, the asset management subsidiary of the Daiwa Securities Group, will acquire 91% of the equity share capital of the AMC and the balance 9% of the AMC will be acquired by DSGI. As a result thereof, there will be a change in the controlling interest of the AMC and DAM will become the sponsor of Shinsei Mutual Fund.

Pursuant to the proposed transaction the name the fund house will be changed from Shinsei Mutual Fund to Daiwa Mutual Fund. The name of the schemes will also be changed as Daiwa Liquid Fund, Daiwa Treasury Advantage Fund and Daiwa Industry Leaders Fund.

In case an investor does not wish to continue to hold units in view of the said changes, they will have the option to exit the said scheme at the prevailing NAV, without any exit load. The said exit option can be availed between 8 December 2010 to 7 January 2011.

Source: http://www.myiris.com/newsCentre/storyShow.php?fileR=20101203142952707&dir=2010%2F12%2F03&source=rss&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Myiris+(myiris.com+-+India's+Leading+Financial+Portal)

Q&A: Sunil Singhania, Head-Equities, Reliance Mutual Fund

Don't get jittery about volatility

Sunil Singhania, head-equities, Reliance Mutual Fund, tells Neha Pandey that the markets will stabilise soon and continue to rise. Edited excerpts:

How long do you see the correction lasting? Where do you see the markets in the next six months to one year?
We continue to believe the economy and equity markets will maintain their long-term growth phase. Corrections of 10-15 per cent can happen in any market. Our advice to investors would be to have a long-term investment horizon, and not get shaken by near-term news-based market volatility. Short-term jitters can never impact the inevitable long-term growth in the markets. We feel the markets will stabilise soon and resume their measured uptick.

In the current market, which sectors are you betting on?
We continue to be bullish on a wide range of sectors. Among the domestic themes, we favour of banks, capital spending and infrastructure-related sectors, including cement. Among the growth-oriented sectors, our view continues to be bullish on pharmaceuticals. We are also positive on information technology and will use the metal pack as a trading play based on price movements.

If a retail investor has a lump sum, should he/she invest in the current market?
The best strategy for a retail investor is to invest in mutual funds via systematic investment plans. Wealth creation for those with regular incomes could be through regular, disciplined investing. For a big investor, who has under-invested in equities, the correction can be used to correct his position and park a lump sum.

Would you advise retail investors to opt for midcap and smallcap stocks? Are there any multi-baggers there?
A diverse economy and a strong entrepreneurial mindset make our markets the best place for bottoms-up stock-picking. Although midcap and smallcap stocks tend to be volatile in the near term, investors with a long-investment horizon can look at investing in good midcap-oriented equity funds. Mutual funds are the best, safe way to invest in equity for retail investors.

What is your outlook on precious metals? Should one accumulate gold, maybe via exchange-traded funds (ETFs)?
We continue to be positive on gold, as it lends good diversification in the overall portfolio of an investor. Gold ETFs make for a very liquid investment compared with physical gold.

Is investing in IPOs and FPOs advisable for retail investors? Any upcoming one that you are betting on?
Good quality IPOs and FPOs have proven to be good return generators. Thus, investors should definitely invest in public offerings, provided the quality of the company is good and the IPO price is attractive, and not overvalued.

Source: http://www.business-standard.com/india/news/qa-sunil-singhania-head-equities-reliance-mutual-fund/416985/

Foreign MFs outpace domestic players in building assets

Assets rise 13% in first half, as local funds show a fall in AAUMs.

At a time the assets of domestic mutual funds are falling, those of foreign fund houses with presence in India, directly or through joint ventures, are growing remarkably.

Industry experts and chief executive officers attribute this to better products and the increasing familiarity of foreign funds with investors.

Statistics from the Association of Mutual Funds in India (Amfi) say foreign players’ assets rose 13 per cent in the first half of the current financial year. Domestic fund houses either registered negative or poor growth.

For instance, in the private sector, Indian-owned fund houses saw a dip of 7.5 per cent in average assets under management (AAUMs) to Rs 2,17,899 crore as on September 30 as against Rs 2,35,585 crore at the beginning of the year. Foreign players in the private sector saw a jump of 14.5 per cent in AAUMs at Rs 57,577 crore. These include AIG Global Asset, Fortis Investment, Franklin Templeton and Mirae Assets, among others.

So, too, in joint ventures (JVs) predominantly owned by foreign players, whose assets have risen by close to 10 per cent. The assets of funds where an Indian partner is dominant have grown a mere 1.4 per cent.

“Foreign-owned fund houses are aggressively marketing their products and investors are getting familiar with them. Moreover, their products are equally good performers,” said Dhruva Chatterji, senior research analyst at Morningstar India, an independent investment research firm.

“If the products are structurally well-positioned and perform well, I see no problem why people should not invest with us,” said the chief executive officer (CEO) of a foreign-owned fund house. He said foreign players faced intense competition, as domestic counterparts and banks-sponsored asset management companies had the advantage of a strong distribution network.

Bank-sponsored fund houses SBI MF and Canara Robeco put together grew assets by 6.8 per cent.

In agreement with this, another CEO of a fund house in a JV with a foreign partner said, “In metros, the brand equity of foreign-owned houses has strengthened. The competition now is to penetrate Tier-I & II cities, which offer huge potential.”

In the first half, the average assets dipped 4.6 per cent to Rs 7,13,290 crore from Rs 7,47,525 crore. Of the 41 fund houses in the country, 14 are fully or majority owned by foreign players.

Source: http://www.business-standard.com/india/news/foreign-mfs-outpace-domestic-players-in-building-assets/416955/

Kotak Mutual Fund revises key features under its scheme

Kotak Mutual Fund has decided to revise key features under its scheme - Kotak 30. The scheme will be renamed as Kotak 50. The change will be effective from 01st January, 2011. The revised investment objective is to generate capital appreciation from a portfolio of predominantly equity and equity related securities. The portfolio will generally comprise of equity and equity related instruments of around 50 companies which may go upto 59 companies at any point of time. Investors, who do not agree to the revision, have an option to redeem or switch their units between 02nd December 2010 to 31st December 2010, without paying any exit load.

Source: http://www.mutualfundsindia.com/news_viwe.asp?news_headline=Kotak+Mutual+Fund+revises+key+features+under+its+scheme+@MF037

MFs post highest profit in 2009-10

HDFC MF the most profitable, followed by Reliance, UTI & ICICI Prudential.

The domestic mutual fund industry recorded its highest profit after tax (PAT) in 2009-10. The industry’s total profit rose four-fold from the previous financial year.

Importantly, the industry made such profits in a challenging year marked by several regulatory changes, like the infamous ban on entry load on equity schemes.

According to a report by the fund industry tracker, Morningstar, fund houses’ consolidated profit after tax in 2009-10 stood at Rs 911 crore as against Rs 224 crore in 2008-09. Prior to the global financial crisis, the consolidated PAT had peaked in 2007-08 at Rs 427 crore, less than half of last year.

The industry profitability, measured by dividing the consolidated profit by total average assets for the financial year, rose sharply to 13 basis points in 2009-10 as against four basis points in the previous year.

HDFC Mutual Fund emerged as the most profitable fund house, with a PAT of Rs 208 crore, followed by Reliance MF (Rs 195 crore).

“The gross income of fund houses has risen substantially, resulting in higher profitability for the industry this year,” said Dhruva Chatterji, a senior research analyst at Morningstar India.

Other fund houses that recorded strong profit growth in FY10 were ICICI Prudential, Birla Sunlife, Kotak and LIC, among others. The 10 largest asset management companies (in terms of assets) accounted for 80 per cent of the industry’s gross income. In 2009-10, their consolidated profit rose 83 per cent, while the consolidated gross income climbed 41 per cent.

Smaller players, such as Quantum, Edelweiss, AIG and Mirae, managed a decent performance on the back of improved profitability.

The industry’s chief executive officers were quite concerned over profitability last year.

The players whose profits dropped include Benchmark, Shinsei, Morgan Stanley, IDFC, Sahara and Baroda Pioneer.

Of the 38 AMCs, 15 were in the red during 2009-10, though their losses fell.

Source: http://www.business-standard.com/india/news/mfs-post-highest-profit-in-2009-10/416801/

Arbitrage funds outdo benchmarks in Nov

Volatile market helps boost performance.

Owing to the volatility in the market, November saw arbitrage funds doing much better than the benchmark indices.

While both the indices saw negative returns, these funds provided returns in the range of 0.5-1.2 per cent.

“Arbitrage opportunities were very good last month as the market was very volatile. These funds give risk-free returns even though they invest in equity, as the positions are already held,” said Mr Raju Singh, mutual fund analyst with SBI Cap Securities. “Around five months ago, there were few such opportunities for these funds to do well. At one point their returns were even lower than that of liquid funds.”

Arbitrage funds perform best in a volatile market. The objective of an arbitrage fund is to provide risk-free returns. Fund managers can hedge their risks by going long in the cash market and short in the futures market.

High returns

November saw a lot of volatility in the market with the Sensex falling by 834 points (-4.05 per cent) and the S&P CNX NIifty by 255 points (-4.17 per cent). The arbitrage funds saw higher returns.

Birla Sun Life Enhanced Arbitrage Fund gave the highest returns at 1.22 per cent, SBI Arbitrage Opportunities Fund was second at 0.98 per cent, followed by Kotak Euity Arbitrage Fund at 0.96 per cent.

Also, these funds do not have very high AUMs. The assets are usually around Rs 100 crore.

“This gives them an advantage as they can then consolidate their portfolios. Having lower AUMs means they can consolidate and diversify their investments,” said Mr Hiren Dhakan, Associate Fund Manager, Bonanza Portfolio.

However, analysts said these funds can put up a better performance. “An arbitrage fund can generally provide 7-8 per cent in annualised returns. Therefore, these funds can actually give higher returns than what they are showing right now since the market is moving in a range,” said Mr Dhakan.

“Arbitrage funds are the safest options as they always hold hedge positions and toggle between cash and the futures options. In that sense, their risk profile is lower. At no point will these funds perform badly because of their hedge positions, except when the markets are either steadily moving up or moving down,” he added.

Source: http://www.thehindubusinessline.com/2010/12/02/stories/2010120251191000.htm

Motilal Oswal seeks nod for Nasdaq ETF

Motilal Oswal Asset Management Company Ltd and the Nasdaq OMX Group, Inc. have filed for an open-ended index ETF, Motilal Oswal MOSt Shares Nasdaq-00 ETF, which seeks to track the Nasdaq-100 Index.

The Nasdaq-100 consists of the top 100 non-financial companies listed on the Nasdaq stock market. “The MOSt Shares N100 will provide investors an opportunity for exposure to the US capital market,” said Mr Rajnish Rastogi, Senior VP & Co-Head of Equities, Motilal Oswal Asset Management Company.

“It aims to provide Indian investors with a global, diversified, rupee denominated, Indian-market-hours access to high growth Nasdaq -100 Index companies such as Google, Microsoft, Apple and other leading global companies,” said Mr Nitin Rakesh, MD & CEO of Motilal Oswal AMC.

Source: http://www.thehindubusinessline.com/2010/12/02/stories/2010120251321100.htm