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Axis Bank to open its Asset Management Company

Private lender, Axis Bank is soon going to foray into mutual fund business. The bank plans to commence this new venture in the coming six to eight months period.

The bank has received an approval from the Securities and Exchange Board of India (SEBI) to start its independent asset management firm and now it is waiting for the equity markets to stabilize before rolling out the first fund.
Siddharth Rath, the bank's senior vice-president and head of capital markets said, "We received Sebi's in-principle approval last month. The launch of our first fund will depend on the conditions of the markets, and investor confidence. We will have a balanced mix of equity, liquid and debt funds in our portfolio."
"The new company will be a wholly-owned subsidiary of the bank and will carry out asset management business," added Rath.
The bank received a green signal from the Reserve Bank of India for this new foray in the month of June. Until now the bank has been disturbing mutual funds of other asset management companies (AMCs) to its customers.
From the past one year, the asset management industry in the country is facing erosion in total assets under management (AUM). At the end of October 2008, the industry' AMU showed a fall of about 19% to Rs 432,000 crore against 532,000 crore, for the same period a year ago.
As per the SEBI instructions, a company needs to have a minimum capital base of Rs 10 crore to set up its own AMC. "We will invest as much capital as required to form our own fund house. Our initial investment will be Rs 25-30 crore," said Axis Bank Executive Director M M Agarwal.
In order to manage and distribute new funds across the country, the bank plans to employ up to 500 people. Rath confirmed that the bank has already decided on the important designations like CEO, chief investment officer, head of marketing, and other vertical heads. However he did not disclose the identities of these people stating that the business plans are still on the process.
Rath also told that in the starting, the bank plans to market and distribute these funds from its own branches without joining with any other bank. Axis Bank has about 750 branches across the country. With this entry, Axis Bank will become 36th AMC in the industry.
The bank also plans for a joint venture AMC with Banque Privee Edmond de Rothschild Europe. This European firm is a part of the LCF Rothschild Group and through this tie-up Axis Bank will offer the Indian customers with investment advisory services for private banking and wealth management.

Source:http://www.rupeetimes.com/news/personal_loan/axis_bank_to_open_its_asset_management_company_1879.html

Diversified debt mutual funds better deal

Do you think the concept of a diversified portfolio applies only to equity investors? Well, it is time to think different. According to financial experts, investors would do well if they diversify their debt mutual fund (MF) portfolio into liquid, income and gilt schemes.
‘‘There is clear indication that investors have to look at another class of funds other than liquid scheme,'' says Y Jawahar, V-P & head of distribution, Mata Securities. ‘‘A combination of 30-40% liquid scheme, 30% each in income and gilt schemes would serve them better.'
However, he quickly adds that unlike in a liquid scheme investors can't park money with a short-term investment horizon in an income or gilt scheme. ‘‘One should have a time horizon of one year or more to invest in an income or gilt scheme,'' he says. However, investment tenure is not the only factor that should determine the investment decision in these schemes.

One should always have a clear view on interest rate movement and risks associated with each scheme before parking money. For example, gilt funds, as the name denotes, invest mostly in government securities and carry little credit risk. Income schemes, on the other, are riskier as they invest in corporate bonds, which carry more credit risk.
‘‘Investors, who believe interest rates will go down further and don't want to take any credit risk should go for a gilt scheme,'' says Mukesh Dedhia, director, Ghalla & Bhansali Securities. ‘‘If you have a very competent fund manager who can excel during volatility, you can earn very good returns from gilt schemes.'' If you are ready for the plunge, you can hope to earn around 9-10% from a gilt scheme.

If you have a little more stomach for risk, you can opt for an income scheme.
‘‘The spread (interest rate difference) between corporate and government bonds have widened considerably. There is scope for contraction and that could enhance returns from income schemes,'' says Dedhia.
You can expect to pocket returns around 11-13% from an income scheme. Now, would you still be happy to keep the money in a liquid scheme and earn around 7%? Well, consider the above factors and take a call.

Principal Financial looking to acquire AMC in India

Principal Financial Group, a leading US based financial group is looking to acquire an asset management company (AMC) in India as it wants to scale up its fund unit operations in the high-potential market, reports Business Standard.
Investment bankers have already been told to look out for possible acquisitions especially those with large equity assets. The company feels that current market situation is best time to do an acquisition because of lower valuations commanded by the company.
Principal Financial has three way joint venture with Punjab National Bank and Vijaya Bank, managing about Rs 70 billion.
Since January, when the stock markets started losing steam, the Indian mutual fund industry has found itself losing their average assets under management (AAUM) every month. Due to current financial market turmoil a large number of smaller fund houses valuations have taken a serious hit. Earlier Lotus Mutual Fund was acquired by Reliagre Aegon.

Source:http://www.myiris.com/newsCentre/newsPopup.php?fileR=20081126151404196&dir=2008/11/26&secID=livenews

ABN AMRO MF is now Fortis Mutual Fund

ABN AMRO Mutual Fund today announced having changed its name to Fortis Mutual Fund with immediate effect. The name of the Investment Manager has been changed to Fortis Investment Management (India) Private Limited.

This follows the global integration of ABN AMRO Asset Management with Fortis Investments in the second quarter of 2008 and the completion of all regulatory processes and procuring necessary clearances in India.

As a result of the global merger, Fortis Investments now has expanded both its investment capabilities and its operational platforms. It manages assets of EUR 192.4 billion (as of September 30, 2008) making it one of the world's leading asset managers in terms of both size and investment offering. It has an extensive reach in terms of dominance and scale in Europe, a large presence in the Americas and a substantial position in Asia. Fortis Investments has a global network of 40 dedicated investment centres in over 30 countries.

Source:http://news.moneycontrol.com/india/news/pressmf/abn-amro-mf-is-now-fortis-mutual-fund/22/10/365509

Liquid funds likely to change investment norms from April

implement the proposal not to invest liquid scheme corpus in papers with maturity beyond 91 days from April 2009.
The decision was taken yesterday at a meeting of some of the heavyweights in the Association of Mutual Funds of India (Amfi). Initially, some members were of the view that this should be implemented with immediate effect. However, when a view emerged that implementing the proposal in a hurry may not serve the purpose, the members finally decided to make it effective from April next, said an industry source.
The mutual fund industry is fine-tuning its recommendations before submitting the same to the Securities and Exchange Board of India (Sebi). Amfi had issued the draft proposals in this regard last week.
There were lengthy discussions on the maturity of fixed maturity plans (FMPs). While some players favoured FMPs of three to six months, others advocated a minimum 12-month maturity. Efforts are on to sort out the differences with the help of Amfi. If there is no consensus, the decision may be left to Sebi.
Those favouring a three-month maturity argue that if the period is long, investors would go in for fixed deposits (FD) with banks.
They have also decided that all funds will have to mandatorily disclose their complete portfolio at least on their website. A transparent portfolio will help investors in taking informed decision in tough times when generally rumors rule. Already, some fund houses have been making full disclosure.
In next few days, these proposals would be finalised and submitted to the capital market regulator after which Sebi may come out with revised norms for mutual funds.
The industry is of the view that the proposals that Amfi is going to submit should give confidence to the market regulator that mutual funds are quite disciplined in their approach towards investors.

Source:http://www.business-standard.com/india/news/liquid-funds-likely-to-change-investment-normsapril/00/11/341341/

JM Emerging Leaders Fund Sensex Over Sponsored

JM Financial Mutual Fund is one of India's first private sector mutual funds-integral parts of the first wave that commenced operations in 1993-94. JM Financial Asset Management Private Limited, the Asset Management Company of JM Financial Mutual Fund, is not a part of this joint venture. Sponsored by J.M. Financial and Investment Consultancy Services Pvt. Ltd., and co-sponsored by JM Financial Ltd., JM Financial Asset Management Private Limited started operations in December 1994. The fund house manages assets worth Rs 8075.65 crore at the end of October 2008.
JM Emerging Leaders Fund (G) an open-ended equity scheme launched in June 2005.The objective of the scheme seeks to long-term capital appreciation from investment in a portfolio of stocks across all market capitalization range. The portfolio may include those companies operating in emerging sectors of the economy or companies, which exhibit potential to become leaders of tomorrow. The minimum investment amount is Rs.5000 and in multiples of Rs.1000 thereafter. The unit NAV of the scheme was Rs 3.70 as on 24 November 2008.
The total net assets of the scheme decreased by Rs 158.75 crore to Rs 163.03 crore in October 2008.JM Emerging Leaders Fund (G) took no fresh exposure to any stock in October 2008.
The scheme completely exited from Rajesh Exports by selling 28.85 lakh units (2.54%) and Praj Industries by selling 5.85 lakh units (2.26%) in October 2008.
Sector-wise, the scheme took no fresh exposure to any sector in October 2008.Sector-wise, the scheme had not exited completely from any sector in October 2008.
The scheme had highest exposure to MphasiS with 11.32 lakh units (10.61% of portfolio size) followed by Bartronics India with 15.45 lakh units (8.81%), 3i Infotech with 28.40 lakh units (7.31%) and Sintex Industries with 7.93 lakh units (7.15%) among others in October 2008.
It reduced its exposure to Bombay Rayon Fashions by selling 2.67 lakh units to 7.18 lakh units (by 2.45%), Sintex Industries by selling 2.79 lakh units to 7.93 lakh units (2.30%), Bharati Shipyard by selling 3.87 lakh units to 1.30 lakh units (by 2.29%) among others in October 2008.
Sector-wise, the scheme had highest exposure to Computers - Software - Large at 10.61% (9.61% in September 2008), followed by Trading at 8.81% (7.37%), Computers - Software - Medium / Small at 7.31% (6.10%) and Diversified - Large at 7.15% (9.45%) among others in October 2008.Sector wise, the scheme had reduced exposure Diamond Cutting / Jewellery to 6.16% (by 4.52%), Engineering to 5.21% (by 4.48%), Textiles - Products to 6.79% (by 2.45%) among others in October 2008.The scheme underperformed the category average over all the time periods. It has underperformed the Sensex over all the time periods.
Over three-month period ended as 24 November 2008, the scheme posted negative returns of 14.92% underperforming the category average that posted negative returns of 5.52%. It underperformed the Sensex that posted negative returns of 5.01% during the same period.
Since inception, the scheme posted negative returns of 77.76% underperforming the negative category average of 50.69%.

Mutuality Concerns of Mutual Funds

The regulations that govern the operations of mutual funds in India are about to undergo some significant changes. This was inevitable, considering the nature of the crisis that the industry has undergone. While the exact nature of the changes are not yet decided, the underlying theme will be that of protecting and enhancing the 'mutuality' of mutual funds. What exactly is this 'mutuality'? This is a concept that investors and - even fund professionals - do not recognize explicitly. However, it lies at the heart of the very concept of a mutual fund.
The principle is that all investors in a fund must be equal partners in it. There are two sides to this. One, the fund company must treat all of them equally. And two - and this one is harder to achieve in practice - funds must be run in such a manner that the actions of one investor can not harm another.
The crisis that funds faced over the last few weeks appears at first sight to be about funds being unable to make redemptions when asked for because of the credit crisis. However, at a more fundamental level, the problem was that of a massive breakdown of the mutuality of the funds. When some investors show up to ask for early redemptions in the midst of a massive credit freeze, then the only way to meet their demands was to sell of the more sellable investments at whatever desperate price they would fetch. In a crisis, it's always the better investments that are more sellable. Were this to be done, then the some investors-the early redeemers-would walk away with some of the returns that actually belong to the ones who stayed on.
This time around, the extraordinary and global nature of the crisis meant that the government made special, once-in-a-lifetime arrangements to enable funds to make redemptions without having to sell off investments at fire-sale prices. The government arranged for bridge loans that enabled funds to make redemptions and yet delay sale of investments. However, in more normal circumstances, many things can happen that lead to similar situations.
One of the solutions that have been proposed is the strict isolation of corporate and individual investors. The idea is that the two kinds of investors should not invest in the same funds-fund companies should run corporate and retail versions of the same funds. This is in fact already done in some funds although in those the motive seems more to protect corporates from the high cost of servicing individuals rather than to protect individuals from the adverse affect of corporate's sudden redemptions.
In principle, the idea of isolating the two kinds of investors is a sound one. The mutuality of mutual funds is easier to maintain if there is reasonable similarity in the nature and motives of investors. However, in practice there is a limit to how much such isolation can be achieved. There are plenty of differences of scale and goals even among corporates and individuals for this not to be a perfect solution. In fact, such issues have come up in the past too. As a result, there was a rule made a few years ago that no fund could have less than twenty investors or have more than a quarter of its assets from a single investor.
The main concern in all of the above is that when some investors redeem their money, then quick sales lead to the portfolio getting degraded. The ideal thrust of the new regulations should be to make sure that investors' investment and redemption cycles should reflect the actual liquidity of the underlying assets. If there's a mismatch between the two, then all the rules in the world will not prevent a breakdown of mutuality.

Source: http://valueresearchonline.com/story/h2_storyview.asp?str=12273