Sebi imposes 150 fee on new MF investments

Market regulator Sebi on Monday said new investors will now have to pay an extra Rs 150 for investment of Rs 10,000 and above in mutual funds, while the charge will be Rs 100 for existing investors.

"In order to enable people with small saving potential and to increase reach of mutual fund products in urban areas and smaller towns, it has been decided that a transaction charge per subscription of Rs 10,000 and above be allowed to be paid to distributors," Sebi said in a circular. Investors are already paying a commission in some cases, besides up to 2.5% of their investment towards expanses of fund management. Now the distributors would be allowed to charge Rs 100 as transaction charge per subscription. No charge can be made for investments below Rs 10,000. "As an incentive to attract new investors, the distributor may be paid Rs 150 as transaction charge for a first time investor in mutual fund," the circular added.

For systematic investment plans (SIPs), the transaction charges can be recovered in 3 or 4 installments, it added. Sebi further said that the investors would continue to pay upfront commission directly to distributors. Last month, Sebi chairman U K Sinha had said that transaction fee is some way to compensate the distributors, who may have lost interest in the distribution of mutual fund products.

Experts said this move is seen as back door imposition of entry load, a fee charged to the investors at the time of their investment in a MF scheme. MF distributors had been demanding re-introduction of entry load, which was abolished by Sebi in 2009. Then the board was headed by C B Bhave. Distributors have been complaining that their business has taken a hit since then.

Source: http://timesofindia.indiatimes.com/business/india-business/Sebi-imposes-150-fee-on-new-MF-investments/articleshow/9701665.cms

Investor interest in MF paints an optimistic picture

SEBI data shows net inflows all months except 2

Investor attraction for mutual funds appears to be in inverse proportion to the returns on the benchmark indices.

When the BSE Sensex was up 17 per cent in calendar 2010, equity funds saw net outflows of Rs 27,824 crore. This calendar, the Sensex has declined 12 per cent (year-to-date), and the same schemes have seen net inflows of Rs 3,211 crore.

Mixed views

The data, available on the SEBI Web site, follows an expected pattern, say analysts. They say it is a mildly optimistic sign. “After having been burnt in FY-09, investors started redeeming funds and booking profits in 2010. The market is now providing investors opportunities to enter,” said Mr Hiren Dhakan, Associate Fund Manager, Bonanza Portfolio.

This is also an indication of the increase in SIP investments, added analysts.

But not all fund managers share this view. Some are concerned that the mood in the market is not all that upbeat. “There is nervousness in the markets as seen by the high degree of volatility in July and August. Overall, the trend, according to distributors, has not been positive,” said Mr Arindam Ghosh, Head — Retail Sales, JP Morgan Asset Management.

SEBI data differs

“The popular adage goes that — Markets fall the very next day after the investors enter,” said Mr Dhakan.

However, SEBI data for the current calendar year shows net inflows into equity mutual funds for every month, excepting March and April.

Retail investors have become cautious and are showing lesser interest in sectoral and thematic funds including defensive bets such as FMCG and pharmaceutical funds, say people in the trade.

According to fund managers, Gold ETFs are gaining popularity among investors. In the calendar year so far, the assets under management of Gold ETFs have increased by 70 per cent from Rs 3,581 crore in January to Rs 6119 crore in July. In calendar year 2010, the AUM jumped by nearly 178 per cent from Rs 1,262 crore in January 2010 to Rs 3,516 crore in December 2010.

Rising from $1,113 an ounce on January 4, 2010 to $1,614 an ounce on July 29, on the London Bullion Market Association, gold as an asset class has returned 45 per cent in 19 months. This also explains the huge increase in the AUM of gold ETFs over this period in consideration, say experts.

Source: http://www.thehindubusinessline.com/markets/stock-markets/article2384369.ece

Sebi wants AMCs to keep an eye on big distributors

The Securities and Exchange Board of India (Sebi) has put the onus of regulating large mutual fund distributors on asset management companies. The regulator, in a circular on Monday, said mutual funds, before empanelling distributors, will have to ensure that the sales process of distributors is delinked from their customer-risk evaluation team.

The Sebi circular said distributors' advisory process should be different from the sales, while defining the principle of 'appropriateness' of products to customer categories. "Appropriateness is defined as selling only that product categorisation that is defined as best suited for investors within a defined upper ceiling of risk appetite," it said.

The distributor has to keep a record of a written communication of its advice to its client in case a product is not suitable for him, the circular said. "A customer confirmation to the effect that the transaction is execution only notwithstanding the advice of in-appropriateness from that distributor be obtained prior to the execution of the transaction," the regulator said.

Fund houses will also have to disclose, on their respective websites, the total commission and expenses paid to those distributors who have point of presence in more than 20 locations and have received commissions of over 1 crore on an annual basis across industry.

Besides, to help retail investors understand the performance of schemes in a better way, mutual funds will have to give point-to-point returns on a standard investment of 10,000 in addition to CAGR (compounded annual growth rate) for a scheme in existence for more than three years. "When the performance of a particular mutual fund scheme is advertised, the advertisement shall also include the performance data of all the other schemes managed by the fund manager of that particular scheme," Sebi said.

Source: http://economictimes.indiatimes.com/markets/regulation/sebi-wants-amcs-to-keep-an-eye-on-big-distributors/articleshow/9700944.cms

SEBI likely to raise PMS entry level to Rs 25 lakh

If you have Rs 5 lakh to Rs 25 lakh and have been entrusting this money to a portfolio manager, you may not have this luxury for very long if a SEBI proposal becomes a regulation.

SEBI in a concept paper has suggested that the minimum amount for investment under Porfolio Management Services (PMS) could be Rs 25 lakh, and not Rs 5 lakh, as it is at present.

So where will someone with Rs 5 lakh to Rs 25 lakh go for customised investment advice and services?

“Such a change will definitely affect people with these kind of sums to invest. They will have to invest in mutual funds,” said Mr Dinesh Thakkar, CMD of Angel Broking.

“Just going to a broker (and not under a PMS scheme) will not get the investor time and involvement that a portfolio needs. So the next route available is the mutual fund, where the money is managed by an expert,” he said.

Broking houses, in fact, fear that people with such sums to invest might fall prey to their own employees and franchisees' misguided or self-serving advice.

It is typical for people with Rs 5 lakh and Rs 10 lakh who do not want to invest in mutual funds to ask brokerage employees, or branch employees or franchisees for advice on what to buy and sell. “And these employees might unnecessarily churn their investments just to earn a bit of commission themselves,” said the managing director of a large broking firm.

“Under the PMS route, however, their porfolios would be centrally administered at the brokerage. There is a portfolio manager who is accountable, and whose incentives are linked to how well the porfolios do,” he said.

‘Killed by regulation'

Some brokerages say they are no longer growing their PMS business. “We do not take on any new clients for PMS,” said Mr Deven Choksey, head of KR Choksey Securities. This product, anyway, is being killed by regulation, he said.

“Firstly, PMS is not sold scheme-wise, but the reporting on it has to be done scheme-wise. Second, we can't customise the investment according to the risk profile of an investor as SEBI has capped investment in single securities.

“So if a doctor wants to put the bulk of his money in pharma and is willing to risk it, he cannot under PMS. If we are to function like a mutual fund, then what is the point,” he said.

Existing PMS customers are serviced, but new customers are given advisory services by his brokerage.

“The low minimum investment amount of Rs 5 lakhs makes these products (referring to PMS) accessible to retail investors without the protection which are available to retail investors under the mutual fund network,” said SEBI in its concept paper.

“To the extent that the services under this route resemble fund management instead of customised services, there is need to recognise and regulate them as private pool of capital,” says SEBI.

So, where funds are pooled they will have to be registered as Alternative Investment Funds, and where there is customised service for each portfolio this service will come under PMS.

Source: http://www.thehindubusinessline.com/markets/stock-markets/article2373456.ece

SBI Mutual Fund launches Gold Fund

SBI Mutual Fund has launched a new fund offer, SBI Gold Fund, an open-ended fund of fund scheme to enable investors to invest systematically in gold and gain advantage of the recent rally in the metal's prices.

The corpus collected from the NFO would be invested in SBI Gold Exchange Traded Fund.

"It is a convenient product and will give an opportunity to an investor to invest in the purest form of gold without the need of buying and storing physical gold, that too, without a dematerialised account unlike gold exchange traded funds," SBI MF Managing Director and Chief Executive Officer Deepak Chatterjee told reporters here.

He said there was a demand for ETFs and the assets under ETF schemes in the country crossed Rs 6,000 crore last month.

The minimum investment in the fund would be Rs 5,000. The new fund offer will open on August 22 and close on September 5, the fund house said.

The fund house will offer systematic investment plan too. SBI MF Chief Investment Officer Navneet Munot said, "Gold could show some volatility in future and hence the SIP route makes more sense. Looking at the current global economic conditions and stock market volatility, gold is a better option".

The fund house said the investors could avail gold loans from the country's largest lender State Bank of India for gold exchange traded funds.

At the end of June quarter, SBI MF managed assets worth Rs 47,874 crore. State Bank of India is the sponsor of the fund.

Source: http://articles.economictimes.indiatimes.com/2011-08-19/news/29905089_1_investment-officer-navneet-munot-physical-gold-gold-exchange

Retail investors flock to gold ETFs

Indian retail investors are betting big on gold exchange-traded funds (ETFs). At a time when domestic mutual funds find it difficult to keep retail investors in equity schemes, rising retail participation in gold ETFs has brought it some relief.

Though the historically high prices have hit jewellery retail sales, as buyers anticipate an imminent correction from current levels, the steep rally seems to have not deterred investors getting into gold ETFs.

During April-July, the investor-base in gold ETFs expanded 24 per cent. More, in just these four months, the industry mobilised more than half of what it gathered in all of 2010-11. Further, in terms of net inflow, 2011-12 saw 4.5 times more flows in the initial months than what was seen in the previous corresponding period.

“Investors from all over the country are putting money in gold ETFs and not only from the top 10 cities,” says a fund manager who manages gold ETFs. He did not wish to be named, due to compliance issues. “Keeping physical gold is neither easy nor beneficial. However, it's easy for investors to have gold ETFs. Financial planners, too, are advising customers to invest in gold ETFs rather than equity schemes.”

Dhruva Chatterji, senior research analyst at fund tracker MorningStar India, says, “Gold has been the best performing asset class in the past few years, which offered double-digit returns. Investors' rising interest in gold ETFs is purely performance-driven, amid volatile equity markets and range-bound returns in debt markets.”

In April-July, gold prices appreciated 12.15 per cent from Rs 20,775 to Rs 23,300 per 10g. During the same period, the domestic benchmark indices gave a negative return of six per cent.

Recently, gold prices have jumped to a new high, after disappointing US economic growth in the second quarter of 2011, followed by the first US government credit downgrade in seven decades, by Standard & Poor’s. The yellow metal’s rally to new highs signalled market worries over uncertainties.

“Retail investors are aware of the fear factors circulating in global markets. Problems related with the dollar and the higher inflationary scenario has made gold the only safe investment haven,” says the executive director of a fund house.

This is clearly evident from the sharp surge in the current month in prices amid crashing equity markets. So far in August, gold has rallied more than what it did in April-July. It closed 15 per cent per cent higher at Rs 26,790 per 10g on Thursday, as compared with Rs 23,300 per 10g on July 30. The period saw benchmark equity indices crash by 9.5 per cent.

However, there is a word of caution, too. According to Chatterji, investors should not see gold as a high-return asset class but as a stable investment option.

“Investors need to be careful and not build expectations of double-digit return on the basis of the recent trend,” he says.

Source: http://www.business-standard.com/india/news/retail-investors-flock-to-gold-etfs/446279/

Birla Sun Life MF Announces Change in Key Personnel

Birla Sun Life Mutual Fund has announced that Mr. Ajay Argal, Head Equity-Offshore, has resigned from the services of Birla Sun Life Asset Management Company Ltd. (BSLAMC) and shall accordingly cease to be key personnel of BSLAMC with effect from 16 August 2011.

Mr. Ravindra Chandra Bhargava, an Independent Director on the Board of BSLAMC, has resigned as director of the Company effective 30 July 2011.

Source: http://www.adityabirlamoney.com/news/500873/10/22,24/Mutual-Funds-Reports/Birla-Sun-Life-MF-Announces-Change-in-Key-Personnel-

Should you follow your fund manager?

Recently, after nearly 15 years at UTI Mutual Fund, Harsha Upadhaya moved out to join DSP BlackRock Mutual Fund. The mutual fund (MF) industry was aflutter last December when Nilesh Shah, a successful fund manager and erstwhile chief investment officer (CIO) at ICICI Prudential Asset Management Co. Ltd, announced his decision to quit after nearly seven years. In April this year, Anand Shah, head (equities) at Canara Robeco Asset Management Co. Ltd quit; Shah is credited with bringing up the performance of Canara Robeco’s equity schemes while he was there.

In the last two years, fund managers of at least 70 equity MFs have moved out. The number is significant and undoubtedly worrying for an investor, who relies on active management for above average portfolio returns.

How does it affect the running of a fund?

The trickiest and possibly the part that makes maximum difference to the situation is what gets done behind the scenes when a fund manager puts in his papers. There is no formula in place and the action taken depends on the policies and philosophy of the fund house.

Some fund houses prefer to let the fund manager leave as soon as the next day. Says Nikhil Johri, CEO, BNP Paribas Asset Management India Pvt. Ltd, “Fund management is a very important responsibility and after the fund manager resigns, it’s difficult to enforce a level of professionalism needed to manage funds. A fund manager quitting is the biggest risk that an asset manager runs. Usually it helps to have a planned succession because we typically follow the ‘gardening leave’ concept in most cases whereby the fund manager who quits is relieved of his duties and responsibilities the next day itself. ”

Others prefer the fund manager to look into the portfolio and make changes needed for a smooth transition during the notice period.

In both cases fund houses prefer to rely more on systems and process rather than individual fund managers. Says Sundeep Sikka, CEO, Reliance Asset Management Co. Ltd, “It is unfair to say it is a one-man show.” Sikka says that the stability of the investment team has a big role to play. He adds, “For most funds we have a main fund manager and an assistant. It’s more about grooming in-house talent and preparing people for bigger roles.”

Though the star fund manager syndrome hasn’t really caught on in India like it has in the US and other developed countries, the Indian MF industry has seen a few fund managers shine over others. Prashant Jain (executive director and CIO, HDFC Asset Management Co. Ltd), R. Sukumar (managing director and CIO, Franklin Templeton Asset Management (India) Pvt. Ltd), Kenneth Andrade (head, investments, IDFC Asset Management Ltd), Sunil Singhania (head, equities, Reliance Asset Management Co. Ltd) and Madhu Kela (erstwhile head equities at Reliance Asset Management Co. Ltd) are few such names.

What about the new fund? There is of course another side to the coin: changes that take place in new funds that the fund manager takes over.

Look at the portfolio of two equity schemes of BNP Paribas after Anand Shah took over as CIO in April. According to data from Capitaline, a data tracker, in four months, BNP Paribas Equity Fund introduced 13 new stocks (21.16% of the July-end portfolio) and took out seven (14.17% of the July-end portfolio), whereas BNP Paribas Opportunities Fund took out 11 (13.29% of the April-end portfolio) stocks and added seven (12.14% of the July-end portfolio). It is noteworthy that the performance of both funds (they have the same fund manager since October 2007 and October 2009, respectively) has shot up in the last four months—they have moved from the last quartile to the top quartile among their peers.

So can one person affect fund portfolios and performance to a large extent? Says Johri, “This is not a simple issue. We did not have a CIO for a while and needed someone to fill the gap in terms of prescribed processes followed at BNP. Anand has come in as the CIO to fill that gap.”

How does it affect fund performance?

While it is common sense that the fund manager’s choice of stocks should technically play a big role in determining performance, it is difficult to allocate performance solely to one fund manager. According to Jayant Pai, vice-president, Parag Parikh Financial Services Advisory Ltd, “When a star fund manager leaves, one has to look at who is second-in-command. Those left behind should be good enough to take it up.”

Unfortunately, even though there are concrete indicators, there is no scientific way to ascertain how the performance suffers when a fund manager leaves and also how long it may take for it to improve.

Let’s look at long-term performance. In case of Sundaram Select Midcap Fund, a long-time top performing mid-cap fund, Anoop Bhaskar who was managing it since September 2003 left in March 2007. After he left, from being a top performer in its segment with a return of 14.19% against a category average of 1.47% between April 2006 and April 2007, the fund’s returns deteriorated to just about average within its category over the next one year, according to data from Value Express, an MF data tracker. The category average returns between April 2007 and April 2008 were 15.85% compared with 16.16% for the fund. Recent data shows that the fund’s relative performance has picked up and it is once again an above average performer in the top quartile within its peer set. Both Bhaskar and its current fund manager, Satish Ramanathan, have different management styles, the latter being more aggressive and holding a more concentrated portfolio than his predecessor. In such cases it is better to stick with the fund manager whose style you are more comfortable with.

What should you do?

The assets under management for equity funds has increased at least 12.5 times since March 2001, but there is dearth of quality manpower. Says Johri, “Experienced fund managers are difficult to find, but it’s not just the investment side where there is dearth of trained and skilled manpower.” There are currently 42 AMCs and approvals for at least 15 others are in the pipeline. Hence, it’s reasonable to conclude that fund managers changing jobs within the industry are likely to continue.

If the fund manager leaves, don’t panic and jump ship; watch the fund performance for at least six months. Also, keep track of significant portfolio shifts. Says Pawan Joseph, vice-president, Motilal Oswal Wealth Management Ltd, “When such an event occurs, we track the fund closely for three-six months to understand if there is any change in action by the new manager and whether he or she is replicating the good actions of the previous manager or making the same mistakes.”

Also, analyse the performance of the equity funds of the fund house you are with and of the new fund house where the fund manager has moved. A wise choice is to stick with the fund house that has a better long-term performance track record for its basket of equity funds.

Source: http://www.livemint.com/2011/08/16221603/Should-you-follow-your-fund-ma.html?h=B