Tata Mutual Fund parts ways with Credit Suisse as offshore fund management partner

Tata Mutual Fund has parted ways withCredit Suisse as its offshore fund management partner in May, an official spokesperson from the Indian asset manager told ET.

"The change is being effected on the basis of the fund manager's macro-economic and infrastructure outlook," the Tata MF official said. "We're in the process of reallocating funds... this change in fund manager has no bearing on our relationship with Credit Suisse or any other services provider," he said.

However, according to industry sources, the investment team of Tata MF was not happy with the contribution of Credit Suisse towards the overall performance of the funds.

Credit Suisse was managingTata MF's Growing Economies Infrastructure Fund and Indo Global Infrastructure Fund.

Credit Suisse officials declined to comment on the development.

This is not the first time that Tata MF has changed its offshore fund management partner. In 2009, it removed US-based asset manager Invesco Global citing poor fund performance. At that time, Invesco had invested a lion's share of the investible corpus in Chinese stocks that were undergoing a bearish trend.

The absence of an offshore fund manager has forced Tata MF to liquidate its foreign assets and hold large piles of cash in the two international funds.

As on June end, Tata Growing Economies Infrastructure Fund Plan A held 66% of its asset under management in cash. Plan B of the same fund, which has mandate to invest 35% of corpus in international securities, maintained about 35% cash levels. Tata Indo Global Infrastructure Fund, which has the mandate to invest 35% in overseas equities, held 27% cash on June end. Both the funds acted as feeder funds into Credit Suisse Emerging Markets Infrastructure Fund, which has generated 7.8% over the past one year.

Despite high cash-levels, Tata Growing Economies Infrastructure Fund (Plan A) has returned over 4% vis-a-vis infrastructure funds category returns of 16.4%. TataIndo Global Infrastructure Fund has generated minus 4.4% return against category returns of minus 8.4%. In terms of value, investors in Indo Global Fund are logging significant losses as net asset value (NAV) of the fund has been locked in a range of Rs 7 and Rs 8 for more than a year. Investors had invested in this fund at a notional NAV of Rs 10.

"From what we see, the domestic portion is weighing heavy on the performance of both funds. The Credit Suisse fund has generated decent returns over a year's time. The underperformance of domestic portion could be because of the bleak outlook on infrastructure sector," a fund researcher said.

According to fund distributors, several investors have redeemed their investments from both these funds. The assets under management of Indo Global Infrastructure Fund have fallen from Rs 2,359.40 crore as on December 2007 to Rs 858 crore last month. The asset base of Tata Growing Economies Infrastructure Fund has dipped from a high of 41 crore in October 2009 to Rs 28 crore in June 2011. Plan B of the same fund, at one point, had assets worth Rs 173 crore. The plan now has assets worth just about Rs 109 crore.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/tata-mutual-fund-parts-ways-with-credit-suisse-as-offshore-fund-management-partner/articleshow/9353252.cms

India to allow foreign investment in mutual funds from August 1.

India will allow qualified foreign investors to invest up to $10 billion in domestic mutual funds from August 1, a senior finance ministry official said on Friday.

The government expects good inflows from qualified financial institutions into mutual funds in this fiscal year to March 2012, Thomas Mathew, joint secretary, capital markets at the finance ministry, told reporters on Friday.

The move to allow qualified foreign investors was first proposed by Finance Minister Pranab Mukherjee in the budget for the fiscal year that started on April 1.

At present, only foreign institutional investors and sub-accounts registered with the market regulator Securities and Exchange Board of India, and non-resident Indians are allowed to invest in Indian mutual fund schemes.

Source: http://articles.economictimes.indiatimes.com/2011-07-22/news/29803534_1_mutual-funds-foreign-investment-capital-markets

Reliance Equity Advantage Fund to be Renamed as Reliance Top 200 Fund

Reliance Mutual Fund has decided to rename Reliance Equity Advantage Fund as Reliance Top 200 Fund with effect from 26 August 2011. Accordingly, the investment objective, benchmark index and asset allocation pattern of the scheme will be altered.

Investment Objective: The primary investment objective of the scheme is to seek to generate long term capital appreciation by investing in equity and equity related instruments of companies whose market capitalization is within the range of highest and lowest market capitalization of BSE 200 Index. The secondary objective is to generate consistent returns by investing in debt and money market securities.

Benchmark Index: BSE 200

Asset Allocation Pattern: The scheme will have a revised asset allocation pattern to invest 65% to 100% of assets in equity and equity related instruments with medium to high risk profile. On the other side it would allocate upto 30% of assets in debt instruments and money market instruments (including investments in securitized debt) with low to medium risk profile.

Unit holders of the scheme are being provided with an option to exit the scheme at the prevailing NAV without any exit load. The option to exit without payment of exit load will be valid from 27 July 2011 upto 25 August 2011.

Source: http://www.adityabirlamoney.com/news/492531/10/22,24/Mutual-Funds-Reports/Reliance-Equity-Advantage-Fund-to-be-Renamed-as-Reliance-Top-200-Fund

Mid-sized MFs outpace majors in first quarter

Institutions and firms allocating larger quantum of funds in debt segment.

Mid-sized domestic fund houses outpaced the industry's top majors in building assets in the June quarter. This is due to the shift in allocation of funds by institutions in smaller players and fixed maturity plans (FMPs), that led to a burgeoning corpus in their debt category.

SBI MF, IDFC MF, Tata MF, Deutsche MF and Kotak Mahindra MF, which manage between Rs 10,000 and Rs 50,000 crore, witnessed their assets under management rise by as much as 35 per cent. At a time when the assets’ growth rate for the top five players is below 10 per cent, players in the second rung are riding on a higher growth trajectory.

Even in the previous financial year (2010-11), when the industry’s overall assets fell by a little over six per cent, and the three top players got a worse hit, mid-sized ones managed a comparatively better performance.

During the June quarter, the average assets of Reliance MF fell compared with the March one. UTI MF registered less than three per cent growth. ICICI MF, HDFC MF and Sun Life Birla MF managed to grow their assets by five to nine per cent.

“There is a major boost from the re-allocation of funds by institutions in short-term and ultra short-term schemes. Institutional money is pouring into the mid-sized fund houses in a larger quantum. However, on the equity side, the scenario is still bleak,” explains an industry CEO who did not want to be named for this story.

Consider this: Inflows in the debt category was the highest for ICICI MF, which saw a rise of 13.6 per cent in its debt assets, while others remained below 10 per cent and in the case of Reliance MF, the rise in debt assets was a marginal 0.37 per cent.

On the other hand, debt assets rose 39 per cent for Deutsche MF and IDFC MF, while SBI MF saw a 27 per cent rise and Tata MF registered a growth of 15 per cent in these assets.

According to an industry expert, “Institutions seem to be putting their funds across the board and not confining themselves to selective fund houses.

Institutions, including corporates, are not allocating larger sums in fund houses where they are already invested.”

Dhruva Chatterji, senior research analyst at fund tracker Morningstar India, says, “Launch of FMPs by the mid-sized fund houses also helped the players garner assets during the quarter.”

Source: http://www.business-standard.com/india/news/mid-sized-mfs-outpace-majors-in-first-quarter/443481/

HNIs take fancy to debt funds & FMPs, lose taste for structured products.

Exotic structured products, which adorned the portfolios of rich investors till about a year ago, are slowly being replaced by high-yielding debt funds and fixed maturity plans (FMPs). Higher fixed income yields, range-bound equities market and aversion to complex investment products are prompting HNIs to avoid structured products and invest in simple debt funds, wealth managers and product manufacturers said.

Apart from simple 'yield-plus-Nifty participation' type of products, none of the complex structures are being sold by wealth managers in significant numbers. These are structures designed to provide capital protection; nearly 75-80% of the corpus is held till maturity in bonds while the remaining portion is actively invested in a Nifty stock basket. The final payout is based on the return of the underlying equity.

"Investors, who are willing to take risk, are only investing in capital protected schemes, which is your regular yield-cum-Nifty participation product. Otherwise, money is chasing fixed income products now," said Shariq Hooda, head of third party products at Religare Securities.

FMPs and high-yielding non-convertible debentures are seeing more inflows than complex structured products, Mr Hooda said. It is range-bound equities market that is making investors allocate more to debt funds. With short-term rates hovering at 9-9.75%, investors are looking to lock-in money at higher rates in FMPs and long-bond funds (8-10 years' tenure) - both of which are yielding near - 10% returns. FMPs - both short-tenured and longer duration portfolios - are a big draw among affluent investors. Average asset under management in FMPs have surged 38% from 87,033 crore in December 2010 to 1,20,662 crore in June 2011, according to Value Research data. Structured products, which compete with FMPs in terms of returns and a certain level of safety, are not finding enough takers, product manufacturers said.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/hnis-take-fancy-to-debt-funds-fmps-lose-taste-for-structured-products/articleshow/9305638.cms

Mutual Funds panel for removing expense ratio cap.

The committee on mutual funds appointed by SEBI to look into the issues faced by the industry is likely to submit its recommendations to the Board of SEBI when it meets on July 28.

One of the issues that the committee has addressed pertains to the expense ratio of asset management companies, sources said. The committee, it is gathered, is recommending that the sub-head caps within the expense ratio be done away with. This will provide some room to mutual funds to give better commissions to their agents.

Expense ratio is how much an investor pays a fund in percentage terms every year for management of his money. This could involve management fees, commissions to agents, fees to registrars and marketing and promotion expenses.

Currently the expense ratio has been capped at 2.5 per cent for equity funds; and there are various sub-categories of expenses which also have their own caps. It is known that the committee is planning to do away with these caps and leave the break up of expense distribution to the discretion of the mutual funds.

It may be recalled that SEBI had, during the Chairmanship of Mr C B Bhave banned entry loads on mutual funds. A large part of this entry load used to be paid as distributors' commission. After the ban the mutual industry went through a black patch when many distributors stopped selling mutual funds.

When Mr U K Sinha took over as Chairman at SEBI, he appointed a seven-member committee, chaired by whole time member Mr Prashant Saran to look into the problems of the mutual fund industry.

Mr Sinha after taking over at SEBI has been often quoted as saying that while mutual fund distributors should be incentivised, the entry load ban will not be lifted.

In fact one of the first circulars issued by SEBI after he took over related to mutual funds. SEBI in March said that load balances of mutual funds shall be segregated into two accounts – one to reflect the balance as on July 31, 2009 and the other to reflect accretions since August 2009. The first load balance can be used for marketing and selling expenses including distributor/agents' commissions, subject to not more than one third of the balance being used in any financial year. The second account could be used without any restrictions.

Yet another recommendation of the mutual fund committee is for a one time flat fee of Rs 100 to Rs 125 to be paid by newcomer to a mutual fund.

Source: http://www.thehindubusinessline.com/todays-paper/tp-markets/article2282777.ece