Equity funds post worst quarter in nearly three years

Diversified equity mutual funds posted their worst quarterly performance in nearly three years with rising interest rates, global economic slowdown and worries over the debt crises resulting in the fall of key stock indices.

Large-cap equity mutual funds have posted a sharp -9.6 per cent in returns in the quarter ended September this year, while returns on mid cap funds too fell at -7.5 per cent over the same period — their worst quarterly performance since the quarter ended December 2008.

Even as key mid-cap indices fell more than large- cap, returns on mid-cap funds have been marginally better than those of large cap funds. The CNX Mid Cap index fell 22.3 per cent, while the large cap indices BSE Sensex fell 18 per cent and BSE 100 fell 19 per cent since December 2008, according to research by Morningstar.

The benchmark sensitive index lost 12.7 per cent during the quarter ended September, while the BSE Mid Cap and BSE Small Cap indices lost 10.1 per cent and 14.9 per cent respectively.

According to data available with Morningstar, infrastructure funds continued their under-performance, and ended the quarter with an average loss in excess of 11 per cent. Banking sector funds were the biggest laggards during the quarter, losing an average 13.1 per cent, on the back of rising interest rates and concerns of deteriorating asset quality of banks. Both the technology sector and global funds lost close to 13 per cent during the period.

“Defensives such as FMCG sector funds were the only saving grace during the quarter, delivering an average return of 5.4 per cent. Healthcare sector funds also did not fall as much as other equity fund categories, and returned negative 6.7 per cent during the quarter. Over the past year FMCG and healthcare managed to deliver a positive return of 14.3 per cent and 2.6 per cent respectively, while other

equity fund categories dabbled with losses over the same period,” said Dhruva Chatterji, senior research analyst, Morningstar.

Source: http://www.indianexpress.com/news/equity-funds-post-worst-quarter-in-nearly-three-years/855863/0

How to keep in touch with your fund

Why bother to track your mutual funds (MF) once you’ve invested in them? You’d think it is your fund manager’s job to manage your money since he charges a fee from you for that. That’s true, but at the very least you must know the names of fund houses and schemes where you have invested. That may be a given to most of us, but you’d be surprised to know that many forget where they had invested their money and many don’t keep records of their investment.

Let’s look at the different ways you could get out of touch with your MF investments and how to get in touch with them again.

Losing touch

Scheme or fund house changes name: In 2011, when Rajkot-based Nitin Soni, 25, tried to dig up the records of a scheme he had invested in four years ago, he was lost. “I scanned the newspapers but could not trace any detail about my scheme or my fund house. I wanted to know the number of units that I had and my scheme’s latest net asset value; I kept going round in circles.” said Soni.

It turned out that he had invested in the erstwhile ABN AMRO​ Asset Management (India) Ltd that changed its name to Fortis Investment Management (India) Pvt. Ltd in November 2008 and eventually to BNP Paribas Asset Management India Ltd in October 2010. Both the name changes took place because the fund house’s international parent got acquired—on two separate occasions—by other foreign groups. So first it was a consortium of The Royal Bank of Scotland Group Plc, Fortis SA/NV and Banco Santander SA that acquired ABN AMRO. Later, BNP Paribas SA and a Belgium government owned company jointly acquired Fortis Bank SA/NV and the name of the Indian AMC changed, yet again, to BNP Paribas AMC.

Soni, obviously, had not kept a track of it nor did he keep an account of the communication sent to him by the fund house, presumably on both the occasions. Says Hiren Dhakan, associate fund manager, Bonanza Portfolio Ltd, a Mumbai-based financial services firm: “Name changes in the MF industry are very common. If the investor is unaware of this, it can be a nightmare for him to trace it without the help of an MF agent or a financial planner. Also, small-time agents may not be savvy enough to dig out this information as some of them may have just washed their hands of the scheme after pocketing their sales commissions.”

What should you do? Typically, names of MF schemes change when either their fund house is acquired by another fund house or when two or more schemes are merged. Whenever such a change happens, your fund house would send you a letter offering a grace period, usually a month’s time, to exit the fund house without paying an exit load, if any, if you do not subscribe to the change.

• Make sure you keep a track of such letters. If you choose to stay invested. All your future new account statements will reflect the changed name.

• If you come across your old investment certificates or account statements and can’t trace the name of the scheme, hit the Internet. More often than not, you should get some information about it that’ll help you trace it.

• If you don’t find success, get in touch with large-sized registrar and transfer agents (R&T; a fund house’s back office and record keepers) such as Computer Age Management Services Ltd (Cams), Karvy Computershare Ltd, Sundaram and BNP Paribas Fund Services. Instead of approaching 45 fund houses, it’s better approaching a few R&Ts.

• If you know an MF agent, request him to do some digging around.

Not updating your address: This one affects many of us. We migrate to large cities in search for better jobs. We stick around, grind it out for a few years and then we get offered a job in another city and we move. But our investments don’t follow us as we fail to inform our fund houses. As a result, our account statements keep reaching our old address. 

What should you do? 

If you are compliant with the know-your-client (KYC) norms, it’s very convenient to get your address changed. All you need to do is update your KYC records. Effective 1 January 2011, KYC has been made compulsory, irrespective of the amount you invest in an MF. Earlier, KYC was required only for investments worth at least Rs. 50,000.

• Visit www.cvlindia.com, the website of CDSL Ventures Ltd, a division of Central Depository Services (India) Ltd (CDSL), the nodal agency appointed to do KYC for MF investors.

• Under its “download” section, download the “KYC detail change” form, fill it, attach proof of your new address, your Permanent Account Number (PAN) card copy and visit any of the points of sale (PoS) terminals of CVL India.

• The list of PoS terminals is on the CVL’s website. Says Srinivas Jain, chief marketing officer, SBI Funds Management: “Most mutual funds are also PoS centres. Even if you are not a particular MF’s investor, you can still approach that fund house’s PoS and submit your request. We’ll do the needful.”

• Once CVL does your KYC change, it puts up the status on its website. On KYC’s website, click the link that says “Inquiry on KYC”. Submit your PAN and you get to see the date as on which the latest update (your address change request) has been affected.

• A senior fund house official told us on condition of anonymity that once the records get updated, fund houses send a letter to the investor at the new and the old addresses, informing about the change.

• But not all are lucky. Says Srikanth Meenakshi, director, FundsIndia.com, an Internet platform to buy and sell funds: “I had submitted my own KYC request change in August 2009; I had originally applied for it in July 2008. My KYC change was done but the CVL website doesn’t reflect the change.”

• Keep an eye on CVL’s website. If you don’t get to see the updated records, call up your fund house and check.

Not saving your account statements: Saving account statements is important as it helps you track your investments. The problem gets heightened in cases of investors who buy MFs purely from the point of saving taxes and invest in equity-linked saving schemes (ELSS) once a year and then forgetting about it. ELSS are equity-diversified schemes that offer tax deduction benefits under section 80C and come with a three-year lock-in period. “Due to the lock-in, people don’t bother to check their investments in the interim thinking that they wouldn’t be able to withdraw in any case,” says Dhakan. Bangalore-based financial planner Anil Rego says that not just do-it-yourself investors, but even some of his own clients forget about their investments. “They’d say ‘my financial planner is there, so why should I bother’.”

What should you do? Cams told us that they can dig out investors’ past records by using their PAN, if they have one. For investors who don’t have a PAN, typically R&Ts use two parameters, namely, first holder’s name, city and/or postal index number code. 

Keep in touch

Register your email address: One of the best ways to keep in touch with your MF investments is to register your email address with your fund house. Assuming your PAN is already registered, fund houses can send you account statements over email. Recently, Cams, Karvy and Franklin Templeton International Services (India) Ltd came together to give consolidated account statement across fund houses supported by either of these R&Ts.

Here as well, if you have a PAN and email (registered with fund houses at the time you had invested), then you can get a consolidated account statement (one statement of all your holdings across all fund houses serviced by these three R&Ts) over email.

How to register your email? The key is to register your email at the time of investing and filling the application form. If you haven’t done already, there is a way out. R&Ts like Cams provide a form (PAN-based service form) with a request to update email addresses.

Once you submit this form to the R&Ts, it will update all your folios (carrying your PAN as the first account holder) with your email address. Do this with all R&Ts that your fund house is attached to.

Rules on consolidated account statements: In a circular dated 8 September, the Securities and Exchange Board of India asked fund houses to issue consolidated statements. What Cams and Karvy are doing at present will now be replicated across the industry.

As per the new rules, you will get a consolidated account statement across all the folios where you have transacted, across all the fund houses. Even if you transact in different fund houses and those managed by different R&Ts, you will get all the details in a single statement. In folios where there is no activity, you will get account statements once in six months. 

Source: http://www.livemint.com/2011/10/04211507/How-to-keep-in-touch-with-your.html

The era of hero fund managers is gone

I agree that the performance of the equity funds has been troublesome; we are closely tracking that. The industry’s current pause has given us a chance to introspect.

Eight months ago, you were told to take charge of SBI Funds Management Pvt. Ltd and you came here from State Bank of India​ with no prior experience in the mutual fund (MF) industry. Was that a disadvantage?

This is the model that we follow at the SBI Funds Management, as in with all other SBI sister concerns. The managing director comes from the State Bank of India on a deputation of three-five years. Unlike my industry peers, I don’t have the advantage of being around for a long time. So it may not work to my advantage, but it doesn’t put me at a disadvantage either. At SBI, we get extensive exposure in diverse areas covering corporate, retail, international as well as investment banking. Most of us get to work outside India also. All that experience helps.

There has been a lot of turbulence in the Indian MF industry. It is going through a turning point and it’s good to join it now; I don’t think it can go down any further. Here on, it’s only going to look upwards. This gives me a good opportunity as a new CEO to focus on things inside.

Interesting, but your equity funds appear to have lost as compared with, say, around 2004 to 2006 when a former fund manager outshone.

Yes, we have slipped quite a bit over the years. There has been a paradigm shift in the MF industry; it has shifted away from the cult fund manager style. I doubt if those same fund managers, if brought in today, would be able to produce the same results in these markets. In those days, our total assets under management (AUM) were Rs. 4,000-5,000 crore. Today a single scheme is almost that much; our overall AUM is around Rs. 50,000 crore. Today, things are much more process driven, risk-focused, risk-adjusted and template-driven. Fund management today is not dependent on one or two persons. The era of hero fund managers is gone.

I agree that the performance of the equity funds has been troublesome; we are closely tracking that. The industry’s current pause has given us a chance to introspect. I think the results are slowly showing up. Our one-year performances of key equity funds are looking up and have shown improvement as against six to eight months before that.

Ultimately, I have brought my sales and investment sides closer and there is regular interaction between the two.

But isn’t that a bit dangerous given that the sales side can put pressure on fund managers for, say, short-term performances?

Of course there is a Chinese wall and in any case, the two teams engage only once in two months. When we meet, we openly share ideas. But why should the pressure come from the sales team? That pressure is already there from our distributors, from, say our biggest one, State Bank of India, which is also our promoter. If our performances are bad, they’re the first ones to ask for explanations.

Speaking of SBI, how important is it for you to be bank-sponsored in today’s scenario?

It is very comforting having the support of SBI’s 18,000 strong sales force and its elaborate branch network. But I feel sometimes,the advantages are presumed. It is not automatic. SBI may have more than 80,000 branches but I still have to show my performance to them because SBI also sells other fund house’s schemes. The brand puts a big responsibility on us and a lot of pressure.

Recently, rating agency Crisil came out with a report that said a majority of actively managed equity MFs underperformed their benchmark indices. What message does this send out to the investing community?

I don’t have a problem with their methodology; it’s pretty standard. Right now the way stock markets are positioned in India, typically you’ll see most schemes are lagging the benchmarks. But if you do the same exercise in a rising period, you’ll see all funds beating their benchmarks.

Most fund managers would be fully invested in equities because their scheme objectives won’t allow them to sit on cash. The kind of alpha (outperformance) that we generate in rising markets is many times more than the lag that can be seen in falling markets. That’s the whole idea of fund management. Otherwise if everybody hugs the benchmark, we may as well put all our money in index funds.

Source: http://www.livemint.com/2011/10/02185648/The-era-of-hero-fund-managers.html

Reliance MF looking for overseas distribution partner

Anil Ambani Group Company Reliance Mutual Fund today said it is looking for a foreign partner to sell its mutual fund products in the overseas markets.

“We are looking at partnering a global firm which will help us in distributing our products overseas,” Reliance Capital Asset Management Ltd CEO Sundeep Sikka told PTI.

India’s largest asset management company Reliance MF has presence in five overseas locations - Dubai, Singapore, Mauritius, Malaysia and the UK.

At the end of June quarter, the fund house managed average assets worth over Rs 1.01 lakh crore and had an investor base of 73 lakh.

Sikka further said that Reliance MF is in talks with various foreign individuals for investment, but did not divulge the names.

In order to promote the portfolio investment route, the government in August allowed QFIs - individual, group or association - to invest up to USD 13 billion in equity and debt schemes of mutual funds.

“We are in advanced stages of talks with a few QFIs and are hopeful of bringing them in shortly,” Sikka added.

He added that Reliance MF will continue to focus on retail customers for expansion and retail debt segment would be its focus area.

“We are planning to come out with innovative products for retail customers which would be simple. We want to cash in on the huge untapped potential that the retail segment has,” he said.

The company is also planning to come out with funds which will invest in the global equities. The company has already filed an offer document with Sebi to launch Reliance Indonesia Opportunities Fund, which seeks to invest predominantly in equity and equity related instruments of Indonesian and Indian markets.

“We are looking at frontier and developed markets as well for opportunities,” Sikka said.

He, however, added that it is only in the planning stage and would need longer term plan of the company to allow Indian investors opportunity to invest in equities of frontier economies like Sri Lanka, Bangladesh and Africa.

Reliance MF offers 22 equity scheme, 12 debt schemes and two ETFs. 

Source: http://www.thehindu.com/business/companies/article2506481.ece

AMFI to launch new portal for all mutual fund transactions

The Association of Mutual Funds in India plans to launch a portal, MF Utility, next fiscal that will facilitate transactions by customers, distributors and financial advisors in schemes offered by various asset management companies on a single, unified platform.

"MF Utility is planned to commence operations by the first week of April, 2012, subject to appropriate clearances from SEBI," Indian mutual fund trade body AMFI's Chief Executive H N Sinor said while addressing the body's 16th Annual General Meeting.

The new portal will help customers, distributors and financial advisors carry out transactions in mutual fund schemes across all asset management companies (AMCs) at one place.

Various issues, including ways to encourage overall growth of the mutual fund industry and foster increased participation by retail investors, especially in smaller towns, were discussed at the meeting.

Meanwhile, Franklin Templeton AMC President Harshendu Bindal and Deutsche AMC Chief Executive Officer Suresh Soni have joined AMFI's board as directors.

In addition, HDFC AMC Managing Director Milind Barve was re-elected as Chairman and Sundeep Sikka, the Chief Executive Officer of Reliance AMC, as Vice-Chairman of the AMFI.

In order to create awareness among investors, AMFI has been conducting various advertising campaigns across the country. Till August 2011, 3,486 investor awareness programs covering 173 cities have been organized.

"Financial literacy cannot come overnight. It is a generational game and we have to continue with this effort on an ongoing basis," Sinor said, adding that mutual fund industry can grow only if we are able to create trust within the investing public.

Sinor also said the mutual fund industry plans to create a group of respected independent individuals to look into the grievances of investors and take quick remedial measures.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/amfi-to-launch-new-portal-for-all-mutual-fund-transactions/articleshow/10207623.cms