AMFI to soon launch campaign to tap potential customers

The mutual fund industry, which boasts of assets of nearly Rs 7 lakh crore, has aggressive plans to reach out to the vast number of untapped potential investors. The soon-to-be-launched campaign will see it demystify capital markets and mutual fund industry in investors’ mind.

The Association of Mutual Fund Industry (AMFI) is to come out with its media campaign soon, perturbed by the fact that amid the growth of other financial investment products, growth of mutual fund industry has more or less remained stagnant.

AMFI, is the umbrella body representing over 40 asset management companies (AMCs).

AMFI had earlier planned to launch its media campaign during the first few months of the year, but given the on-going cricket world cup, which will be quickly followed by the Indian Premiere League (IPL), it postponed the launch till the completion of the IPL.

“The advertisement campaign will purely be from the AMFI’s side. It will not be fund or scheme specific. We will focus on mutual funds as a product and will try to demystify what a mutual fund is, so that we can bring more investors in the forum. We had planned to launch this on the television, but because of the world cup followed by the IPL, we realised that this is not the right time to go ahead with the launch. After the IPL, we would come out with our media advertisement,” said an AMFI official.

So far, individual fund houses have been advertising their products through print and electronic media but in vain. “We have all along been concerned with a major issue of how to grow the market. Across the financial services sector, products such as insurance and those offered by banks have grown. But mutual fund industry is more or less static. In fact, it has de-grown if we consider by the assets under management over the last two years,” the official added.

Out of the over 100 crore population, “we have less than a crore unique mutual fund investors. Though potential is enormous, how to reach out to these people and sell them the product is essentially an issue. Moreover, issue is largely around the retail participation and that too around the equity segment,” he said.

After the entry load ban by the Securities and Exchange Board of India (Sebi), fund industry continued to bleed, as it could not garner fresh assets in the equity class. The MFs continued to lose number of investors which impacted the equity assets too. As on February, the equity asset under management has reduced to below Rs 2 lakh crore against the overall industry’s assets of close to Rs 7 lakh crore.

“Through our campaign, we need to make investors understand that this is not a race-course. If you (investors) have additional disposable surplus which can garner better returns, one should look at mutual fund as an asset class,” the official further added.

Source: http://www.business-standard.com/india/news/amfi-to-soon-launch-campaign-to-tap-potential-customers/430103/

Daiwa Mutual Fund floats Government Securities Fund-Short Term Plan

Daiwa Mutual Fund has launched Daiwa Government Securities Fund-Short Term Plan, an open-ended gilt fund.

The scheme seeks to generate income and capital appreciation by investing predominantly in sovereign securities issued by the central government (including treasury bills) and/or by state governments, with maximum average portfolio maturity of three years.

The new issue closes on 30th March. The minimum investment amount is Rs10,000.

I-Sec Si-bex Index is the benchmark index. Killol Pandya is the fund manager for the scheme.

Source: http://www.moneylife.in/article/daiwa-mutual-fund-floats-government-securities-fund-short-term-plan/15075.html

Finally, Indiabulls, IIFL and UBI get MF licence

Markets regulator The Securities and Exchange Board of India (Sebi) has given a final approval to Indiabulls Financial Services, India Infoline and Union Bank of India-KBC Asset Management to start their mutual fund business, said two people familiar with the development.

Indiabulls and India Infoline had applied for a mutual fund licence in 2007 and 2008, respectively. Union Bank had applied in 2009. "We have received an approval from Sebi to start the mutual fund business," said Nirmal Jain, chairman India Infoline. "We will be launching our products in the next two months. We will be looking to launch index and ETF products," added Jain. Currently, Sebi has around 23 pending mutual fund applications with Sebi.

On March, ET had reported about pending mutual fund licences with Sebi. According to people familiar with this matter, the regulator was not comfortable in granting licences to financial services companies. It is understood that Sebi's whole-time director Prashant Saran has expressed concerns over granting mutual fund licences to non-serious players.

The mutual fund industry is currently seeing a 9% growth with close to Rs 6.2 lakh crore of assets under management. The new entrants in the mutual fund industry feel that India's asset management industry is underpenetrated and doesn't even constitute even 10% of the GDP. But companies are also witnessing exits by HNIs from mutual funds to other short-term investment opportunities.

Many new entrants in the mutual fund business had burnt fingers in the 2008 financial crises. Regulatory challenges, like the entry load barrier, were also seen as deterrents. But this March, new Sebi chairman UK Sinha had removed the entry load barrier which many fund houses see as a boon. But companies, like India Infoline, feel that the mutual fund is a long-term business and India, with a GDP of 9%, is a huge growth proposition.

Source: http://articles.economictimes.indiatimes.com/2011-03-23/news/29178477_1_fund-mf-licence-asset-management-industry

LICMF Infrastructure Fund to be converted into an Open Ended Equity Scheme

LICMF Infrastructure Fund which was launched as a 36 month, close ended equity scheme is being converted into an open ended equity scheme with effect from 24 March 2011.

All the provisions pertaining to close ended scheme shall cease and those pertaining to open ended scheme as applicable for other existing equity schemes shall become effective from the effective date. The units of the scheme shall be available for continuous sale and repurchase on all Business Days at NAV based price on an ongoing basis.

Pursuant to the conversion into open ended equity scheme, the following changes will come into effect.

The exit load charge will be 1% if exited within 1 year from the date of allotment of units and nil if exited after 1 year from the date of allotment of units.

The minimum investment amount will be Rs. 2000 and thereafter in multiples of Rs. 1 except in case of SIP where the minimum amount would be Rs. 100

Source: http://www.indiainfoline.com/Markets/News/LICMF-Infrastructure-Fund-to-be-Converted-into-a-Open-Ended-Equity-Scheme/3614780708

Birla Sunlife MF, HDFC MF, Reliance MF and Franklin Templeton offer payouts to retain investors

Fund houses are attempting to woo flighty investors by offering handsome dividends, with the market trading flat over the past one year. Fund houses such as Birla Sunlife Mutual Fund, HDFC MF , Reliance and Franklin Templeton have announced dividends ranging from 15% to 20%, in an effort to incentivise investors and persuade them to retain money in existing schemes.

Much more than the current market, it is the year-ago (2009-2010 ) market rally that is helping mutual funds to dole out higher dividends to investors. The ' dividend cushion' that funds created in 2009-2010 - when the stock market more than doubled - is helping fund managers pay dividends in 2010-2011, when the benchmark Sensex returned just over 1.4%.

"Even though the market returned over 100% last year, fund houses distributed just about 20-30% as dividends. Fund houses are paying dividends from the gains they made last year," said the head of investment of a bank-promoted fund house. "Fund managers of highdividend paying funds have managed to shelter their 'dividend cushion' (generated from last year's investments) from market volatility," the investment head said.

Apart from 'dividend cushion', several small-sized fund houses have seen their asset bases widening over the past six months, thanks to regular inflows, especially through systematic investment plans. Asset bases of Axis Mutual and Mirae Asset Investment have grown 44% and 34%, respectively, between April and December 2010. Asset under management or the AUM, of JP Morgan Mutual Fund, DSP Blackrock , Franklin Templeton and Fidelity Mutual Fund rose 15 to 26% during this period.

"Smaller fund houses are paying higher dividends than big-sized asset managers. Fund houses, like Taurus and Sahara Mutual , have paid dividends in the range of 20-25 %. By paying out high dividends, these fund houses expect to attract more investors into their schemes," said Rupesh Bhansali, head-mutual fund research, GEPL Capital.

According to Mr Bhansali, if one takes an year-on-year comparison, dividend yields generated by top fund houses have come down significantly this year. If one compares industry numbers, overall dividend yields have fallen from 25-30 % in 2009 to 17-19 % in 2010, he said.

Fund houses announce dividends to keep retail investors in good spirits. A good dividend payout, especially at a time when the market is choppy will prompt them to stay invested in schemes. A huge dividend payout will also help distributors sell the product more efficiently and bring in more money. "Retail investors, especially elderly investors, expect dividend payouts periodically," Birla Sunlife Mutual Fund CEO A. Balasubramanian.

"We could generate distributable profits from investments made in the first half of current year. The market has turned bearish only since September. We were also able to keep our NAV at higher levels, when the market was trending down," Mr Balasubramanian said.

Conventional fund management wisdom makes it imperative for fund managers to declare dividend as it is one of the few ways to take profits off the table. This is more so in the case of an overheated market, where there are not many good investment opportunities.

Source: http://economictimes.indiatimes.com/articleshow/7759136.cms?prtpage=1

SIP rise helps MFs brake pace of equity folio loss

The domestic fund industry has been able to apply brakes on the pace with which it was losing its equity folios.

So far, in the second half of the current financial year, fund houses have lost a little over 200,000 folios. This is less than what the industry had lost in every single month during the first half.

The industry had witnessed a loss of close to 1.7 million folios in the equity segment during April-September, close to 300,000 every month. According to the Securities and Exchange Board of India, as on February 2011, industry’s equity folios were 39.2 million, against 39.4 million at the end of the first half of 2010-11.

“A large number of systematic investment plans (SIPs) brought this reversal. However, it is too early to say if it is an evolving trend,” says H N Sinor, chief executive officer of the Association of Mutual Funds in India. On an average, there is a monthly addition of 100,000 SIPs every month, adds Srinivas Jain, chief marketing officer of SBI MF. Agrees Karan Datta, national sales head at Axis MF: “Redemption levels have come down a bit, besides higher SIP growth.” Though it’s an encouraging trend for the industry, which has been hit hard and especially on the equity side of the business, market observers can’t say if it would be a sustained trend. For the year so far, equity schemes are still facing a net outflow of Rs 13,281 crore against a net inflow of Rs 2,611 crore during the previous year’s corresponding period.

Except the first month of the second half, inflows in the equity segment has seen a consistent improvement. In fact, February was marked by a record net inflow in equity schemes since the entry load ban came into effect in August, 2009. More, last month was the third in a row that industry saw money flowing into equity schemes. The sales of equity-related schemes in February, including equity-linked saving schemes, were marginally up at Rs 6,038 crore against Rs 5,969 crore in September.

However, compared with the same month last year, sales of equity-related schemes are up 10 per cent against Rs 5,486 crore in February 2010.

Currently, the industry has a little over 40 competitors, with equity asset under management of around Rs 1.9 lakh crore. The number of overall folios in the categories, including income funds, equity and exchange-traded funds, is 4.71 crore.

Source: http://www.businessstandard.com/india/news/sip-rise-helps-mfs-brake-paceequity-folio-loss/429267/

Invest 5-10% of your portfolio

After launching a Nifty-50 remix fund, Motilal Oswal Mutual Fund’s recent offering — MOSt Shares Nasdaq 100 — continues with its policy of launching exchange-traded funds (ETFs).

The move seems timely because the US markets have performed better than the Indian markets in recent times. Since the beginning of the year, the Nasdaq 100 has returned 14.45 per cent, whereas the Sensex only 1.74 per cent. The scheme plans to invest 95-100 per cent in the shares of Nasdaq 100 companies.

Also, ETFs are cheaper than equity-diversified funds, in terms of expense ratio. The total expense ratio of MOSt Shares Nasdaq 100 will be one per cent, as against an average of two per cent for other equity-diversified funds.

It is the first ETF in India which will invest in shares listed on the NASDAQ 100, and the second index tracking ETFs after Benchmark AMC’s Hang Seng Bees.

While these are the good news, there are some restrictions as well. The fund does not have a systematic investment plan (SIP) option yet. Although the fund will invest in equities, it will be taxed as debt fund. It implies that there will a long-term tax on capital gains at 10 per cent with indexation benefits and 20 per cent, otherwise. In the short-term, capital gains will be added to income and taxed, according to the tax slab.

The fund house has said investors in the new fund offering (NFO) period — between March 16 and 23 — would get double indexation benefits such as a fixed maturity plan. The scheme will be listed at the Bombay Stock Exchange and the National Stock Exchange on April 4.

For investors, who want to take advantage of the turnaround in the US markets, this fund is a good opportunity. The international flavour, that is, being able to invest in scrips such as Microsoft, Google, Amazon, Yahoo and eBay, is definitely an added attraction.

But don’t go overboard. Financial planner Radhika Gupta says, “While there are very good companies listed on the Nasdaq, they mostly belong to the information technology segment. This leads to overexposure in a particular sector.”

Alhough the US stock market has turned around this year, it has not performed exceptionally well in the last few years.

Investors in the Indian markets would have earned higher returns from the Sensex. In the last two and five years, the Sensex has returned 41.13 per cent and 10.48 per cent annually. In comparison, the Nasdaq-100 has returned 35.65 per cent and 5.7 per cent in the same periods.

Rajesh Tanna, AVP-MF at Bonanza Portfolio, says, “This product is mainly targeted towards high net-worth individuals. Retail investors do not really understand how the product works.” Ideally, if you are well-invested in Indian stocks, either through direct exposure or mutual funds, you can look at this fund.

This is a good portfolio diversifier. Invest only part – say, 5-10 per cent of portfolio – in this product.

Source: http://www.business-standard.com/india/news/invest-5-10your-portfolio/429273/

Product Crack| Mirae asset India-China consumption fund

Mirae Asset India–China Consumption Fund (MICF) is an equity diversified mutual fund scheme that aims to invest at least 65% of its corpus in Indian equities and the rest in Chinese equities. MICF will invest in consumer-oriented sectors, such as fast-moving consumer goods, banking, media and telecom. While fund manager Gopal Agrawal will manage the India portion of this scheme, Basavraj Shetty is the designated fund manager of the international portion of the portfolio, with assistance from Mirae’s Hong Kong office.

What works

A growing middle-class population and their rising income are two factors that will give a boost to the middle-class consumption and companies engaged in this sector. Mirae estimates that India’s middle-class spending will rise by 18% and China’s will increase by 15% over the next five years. Rising population of India and China is expected to boost demand for products manufactured by companies in the consumption space. For instance, the fund house expects Asia’s middle class population (excluding Japan) to grow at a compounded rate of 11% over the next five years. As per the five year plan released by the Chinese government, the minimum wage is expected to increase by 50% during the period from 2010 levels.

What doesn’t

China’s growth projections can paint an attractive picture, but with a country that is devoid of democracy and is tightly controlled by its government, it’s a bit tricky to navigate their projections. Further, though investing in foreign equity shares offers diversification, there isn’t much merit in looking overseas when the Indian equity market offers multiple options with scores of listed companies and equity mutual fund schemes that come with a decent track record. Mirae’s existing scheme that invests in China (Mirae Asset-China Advantage Fund) returned 10.42% in the past year. In other words, it navigated the recent volatility in Chinese equities reasonably well. However, in 2010, the fund underperformed equity diversified schemes that focused solely on India.

Mint Money take

Consumption is an attractive theme that most fund managers in India seem to have lapped on. However, ignoring India-specific funds—some of them with a good track record—and going abroad is completely your choice. If you must invest, an ideal time horizon would be not more than three years. Also, take minimal exposure if you must. A better alternative is to stick to a India-specific diversified fund.

Source: http://www.livemint.com/2011/03/21213836/Product-Crack-Mirae-asset-Ind.html