Amfi to upgrade certification test

Plans separate module for offshore funds

The Association of Mutual Funds in India (Amfi), the representative body of asset management companies (AMCs), is in the process of upgrading the mutual fund certification programme in a bid to bring in more competency among fund distributors and advisors.
While a new work book is being designed for the certification test, Amfi is also working on a separate module for offshore funds.
“We are now going to revise the work book and the question bank will be based on it. The work book will be released by December 2009. Upgrading the test modules will help distributors and advisors gain more expertise about the products,” said A P Kurian, chairman, Amfi.
“The scope of the certification programme could be extended to cover all components of financial planning. Implementing a minimum standard of giving advice is an essential next step towards the industry’s development. The programme should also include knowledge about global products,” said Navin Suri, CEO, ING Investment Management.
The Amfi test is a multiple option-testing programme, with 50 being the passing mark out of a total of 100.
The certification programme comes in two modules — Amfi Mutual Fund - (Basic/employees) Module Certification and Amfi Mutual Fund (Advisors/distributors) Module. There are no restrictions of age or qualification for anyone to take the test, but the Securities and Exchange Board of India (Sebi) has made it mandatory for every entity engaged in marketing and selling of mutual fund products to pass the certification test (advisors module).
Amfi and those AMCs that distribute offshore funds, feel that there should be separate module for the distributors who wish to sell global funds. “The asset allocation patterns of offshore equity funds are different from conventional schemes that are guided by domestic market dynamics. So, there should be separate test and training for the distributors who sell such schemes,” said the CEO of a global AMC.
“We will work out a separate module for the distributors who also want to sell products that invest across other global markets, but we have not finalised anything in this regard so far,” said Kurian.
There are about 90,000 Amfi-certified distributors in India at present. Though an upgradation of the test could help bring in more expertise among distributors, some fund houses feel that any significant change in the test modules could complicate the test, which would not be desirable, considering the low penetration level of the industry as compared to the insurance sector. As per industry estimates, there are about 3 million life insurance agents in India at present.

Source: http://www.business-standard.com/india/news/amfi-to-upgrade-certification-test/360259/

How to review MF investments before redeeming the units?

TAKE STOCK OF EXIT LOADS & TAX IMPLICATIONS
IF YOUR mutual fund investment is yielding a lower return than what you anticipated, you may be tempted to redeem your units and invest the money elsewhere. The rate of return of other funds may look enticing, but be careful: there are both pros and cons to the redemption of your MF units. Let’s examine the circumstances in which liquidation of your fund units would be most optimal and when it may have negative consequences.

MUTUAL FUNDS ARE NOT STOCKS

The first thing you need to understand is mutual funds are not synonymous with stocks. So, a decline in the stock market does not necessarily mean that it is time to sell the fund. Stocks are single entities with rates of return associated with what the market will bear. Stocks are driven by the “buy low, sell high” rationale, which explains why, in a falling market, many investors panic and quickly dump all of their stock-oriented assets. Mutual funds are not singular entities. They are portfolios of financial instruments, such as stocks and bonds, chosen by a fund manager in accordance with the fund’s mandate. An advantage of this portfolio of assets is diversification. There are many types of mutual funds and their degrees of diversification vary. Sector funds for instance, will have the least diversification, while balanced funds will have the most. Within all mutual funds, the decline of one or a few of the stocks can be offset by other assets within the portfolio that are either holding steady or increasing in value.

WHEN YOUR FUND CHANGES

Do keep in mind that even if your fund is geared to yielding long-term rates of returns, that does not mean you have to hold onto the fund through thick and thin. The purpose of a mutual fund is to increase your investment over time, not to demonstrate your loyalty to a particular sector or group of assets or a specific fund manager. Kenny Rogers once said, “The key to successful mutual fund investing is “knowing when to hold ‘em and knowing when to fold ‘em”. The following four situations are not necessarily indications that you should fold, but they are situations that should raise a red flag. Change in Fund Manager: When you put your money into a fund, you are putting a certain amount of trust into the fund house & fund manager’s expertise, which you hope will lead to an outstanding return on an investment that suits your investment goals. A category of investors track fund managers more than they track the fund house and its schemes. These investors invest in a mutual fund relying mainly on the star fund manager’s investment prowess and skills. One should always invest in process-driven fund houses. This is a more reliable way of investing than betting on star fund managers. Ifthe prospectus states that the fund’s goal will remain the same, it may be a good idea to watch the fund’s returns over the next year. Change in Fund Strategy: If you researched your fund before investing in it, you are most likely invested in a fund that accurately reflects your financial goals. If your fund manager changes the investment mandate that do not reflect the mutual fund’s original goals, you may want to re-evaluate the fund you are holding. For example, if your small-cap fund starts investing in a few medium or large-cap stocks, the risk and direction of the fund may change. Note that funds are typically required to notify shareholders of any changes to the original prospectus.

Change in Fund Performance:

If the mutual fund returns have been poor over a period of less than a year, liquidating your holdings in the fund may not be the best idea since the mutual fund may simply be experiencing some short-term fluctuations. However, if you have noticed significantly poor performance over the last two or more years, it may be time to cut your losses and move on. You can also compare the fund’s performance to a suitable benchmark or to similar funds.Equity funds should ideally be evaluated over the long-term (at least three years). Taking a decision in haste without understanding the investment proposition of the mutual fund could prove counterproductive and expensive (if there is an exit load).When Your Personal Investment Portfolio Changes:Besides changes in the mutual fund itself, other changes in your personal portfolio may require you to redeem your mutual fund units and transfer your money into a more suitable portfolio. Here are two reasons which might prompt you to liquidate your mutual fund units:The need to rebalance your portfolio: If you have a set asset allocation model to which you would like to adhere, you may need to rebalance your holdings at the end of the year to get your portfolio back to its original state. In these cases, you may need to sell or even purchase more of a fund within your portfolio.

Need a tax break:

If your fund has suffered significant capital losses and you need a tax break to offset realised capital gains of your other investments, you may want to redeem your fund units to apply the capital loss to your capital gains.

Selling a mutual fund isn’t something you do impulsively, without a great deal of thought and consideration. Make sure you are clear on your reasons for letting it go. However, if you have carefully considered all the pros and cons of your fund’s performance and you still think you should sell it, do it and don’t look back. Before you press the sell button, take stock of the tax implications and exit loads, if any. And given that market movement are random and not in the hands of the investors, don’t try to time your exit.

AIG Mutual Fund Announces Change In Key Personnel

AIG Mutual Fund has announced change in the key personal of AIG India Equity Fund, an open ended equity scheme and AIG Infrastructure and Economic Reform Fund, an open ended equity scheme, with effect from 14 June 2009. Tushar Pradhan, Chief Investment Officer-Equities who is currently managing the above mentioned schemes is leaving the services of AIG MF, with effect from the end of day of 13 June 2009.
The schemes managed by Tushar will be managed by Huzaifa Husain, with effect from 14 June 2009. And Husain is re-designated as Head-Equities.

Source: http://www.stockadv.com/2009/06/06/aig-mutual-fund-announces-change-in-key-personnel/

HNIs poised to invest big in equity, eye budget

While political stability has helped the foreign institutional investors gain confidence about the Indian capital markets, the big ticket investors which include high net worth individuals and non-resident Indian are also are expected to pump in money afresh soon.
This group of investors was faced with a crisis of confidence till the end of March quarter and preferred to sit on cash. In wake of the economic slowdown, they kept investing a small part of their corpus in debt products only. With the market rallying again, their focus has now shifted to equities.
The emergence of a stable government with a reformist Prime Minister Dr. Manmohan Singh at its helm has stopped the waning confidence level of these high income investors. They are eyeing opportunities in India in the form of economic policies. Such opportunities are expected in infrastructure and retailing sectors, insurance and banking reforms, export boom, increased spending in power sector and disinvestments of PSUs.
They don’t seem much perturbed over valuations. Going forward, they expect high earnings growth from Indian companies from the impact of stimulus packages. Consequently in one year, they foresee re-rating of earnings per share of individual companies, which would end up in re-rating of P/E ratios.
Said Ashish Kukreja, vice president- PCG, Unicon Investment Solutions, “all high net worth individuals are once again bullish over India’s growth story. All of them are now sitting on the sidelines with huge cash. Once the budget is over, we will see considerable investment flows in equities from them.”

“Some HNIs have already started investing in equities post election, allocating 5-30 per cent of their total equity allocation. The negative sentiment amongst them is fully gone,” said Jaideep Hansraj, EVP & head of wealth management services, Kotak Mahindra Bank.
However, Kotak’s Hansraj believes investors would not rush into equities, as in 2007, despite the rising optimism. “Euphoria is more of a stable government’s policy expectations,” he commented.
According to a market grape vine, investment by high income individuals could touch 20-30 per cent of total FII investment (under current level) in the next two months. Money would come through either the mutual fund route or direct participation in equities. In May, FIIs net bought Rs. 21168.60 crore of Indian equity.
“In MFs, infrastructure funds will gain popularity among those investors,” added Unicon’s Kukreja.
“HNIs who can read world markets better having greater risk taking capability, are keenly waiting for an entry point into Indian equities. It alone suggests their faith on Indian markets, which has very much bottomed out,” said Raj Majumdar, founder and CEO, iMetanoia, a Bangalore based financial services firm.
Post-budget, there would a correction due to heavy expectations over new government’s budget, which might not be met, feels Majumdar.

Source: http://economictimes.indiatimes.com/HNIs-poised-to-invest-in-equity-eye-budget/articleshow/4620858.cms

Retail investors yet to join rally

While Indian investors are cheering the bull run in stock markets, nearly
3,000 point-rally in sensex post-elections seems to be the handiwork of foreigners. Foreign institutional investors (FIIs) seemed to be the ones doing most of the buying, while domestic institutional investors (DIIs) such as banks, financial houses, insurance companies and mutual funds have largely remained on the sidelines.
From the day markets first opened after election results (May 18) till Thursday (June 4), FIIs have made net investments worth Rs 12,000 crore in stocks with nearly 90% of that money coming in just four days, Sebi data shows. Out of the 14 trading days, which saw the sensex rising from 12,000 to 15,000, FIIs have remained net buyers on 10 occasions. This clearly shows how foreigners are more bullish about India. "The dirty little secret of the Indian economy is that it has actually been performing much better beneath the surface than the China comparison might otherwise suggest. India has long had a much better micro story than China," Stephen Roach, chairman of Morgan Stanley Asia, feels.
The turnover data for DIIs shows how they have not only been aloof to the idea of fresh investments but also remaining invested in the market. The net position after buying and selling done by DIIs is nearly (-)Rs 1,300 crore from May 18 till June 3, data combined for BSE and NSE shows.
Retail investors have largely stayed away. Experts feel many retail investors got little time to enter markets while others endlessly waited to enter anticipating a correction.

Source: http://timesofindia.indiatimes.com/Business/India-Business/Retail-investors-yet-to-join-rally/articleshow/4618821.cms

MFs catch up with bull run

Mutual funds (MFs) have caught up with the May momentum in the final lap. After remaining on the sidelines for quite sometime during the market rally, they have net bought equity to the tune of about Rs 1,800 crore during the last three trading days of May.
This is perhaps the biggest purchase in a short period after the rally began in March. The sharp buying in the last few days has made May the best month in fund activity as fund houses bought net equity (higher gross purchase over sales) worth Rs 2,291 crore, the highest since September when the market downturn began.
In all, MFs bought equity worth Rs 18,956.7 crore in May, the highest in 2009, data with the Sebi shows. The May purchases, which is more than three times of what MFs bought in February and 56.1% more than what they bought in April, is the highest in nearly 15 months.
"The long term outlook has turned positive. Though inflows are not high in absolute terms, interest is picking up," says Navneet Munot, CIO, equity, State Bank of India MF. While elections acted as a trigger, recent economic data has been supportive and results have been in line with expectations, he says.
MFs turned net buyers of equity for the first time in March lapping up equity worth Rs 11,721.3 crore in the month. However, their net purchases came down from Rs 1,475.3 crore in March to mere Rs 38.9 crore in April, data shows.

Source: http://timesofindia.indiatimes.com/Business/India-Business/MFs-catch-up-with-bull-run/articleshow/4618820.cms

Corporate, banks dominate mutual fund assets - AMFI

Corporate, banks and foreign institutional investors collectively control more than half the assets of Indian mutual fund industry, data compiled by the Association of Mutual Funds in India (AMFI) show.
The first ever break-up of investor class released by the trade body shows retail and high networth individuals held 1.8 trillion rupees worth of mutual funds or just over 43 percent of the industry's 4.2 trillion rupees assets at the end of March.
Fixed income funds, which contributed 70 percent to the industry's assets, is dominated by the non-retail investors. They controlled nearly three quarters of the 2.9 trillion rupees assets of fixed income funds that include money market funds.
Retail and high networth individuals were the main investors of equity funds that managed 1.1 trillion rupees at the end of March, the data shows.
AMFI plans to release the data every six months, a trade body official said.

Source: http://in.reuters.com/article/businessNews/idINIndia-40107020090605?sp=true

MFs investing in small cos clock big gains

While many large cap stocks with over Rs 10,000 crore in market capitalisation have lead the bull rally, mutual funds invested in mid-cap and small-caps have landed stellar gains riding stock performance. A quick look at around 35 mutual fund schemes that are known to have invested in smaller companies shows that the average fund's net asset value (NAV) has appreciated 90% in the last 3 months.
Topping the charts is SBI Magnum Midcap Fund having managed to gain 127% gains in the last 3 months. Others funds such as JM Emerging Leaders, JM Small & Mid-Cap, SBI Magnum Sector Umbrella Emerging Businesses, Principal Junior Cap, Sundaram BNP Paribas Select Midcap, Principal Emerging Bluechip, Canara Robecco Emerging Equities, DSP BlackRock Micro Cap and Sahara Midcap Fund have doubled their NAVs in the space of just 90 days, AMFI data till June 3 shows.
"When markets have momentum, mid-caps tend to outperform. Even when markets are range-bound, midcaps still perform reasonably well compared to larger companies. The only thing that could stall their rise would be 10-15% correction. I don't see any India-specific factor that would bring down the indices by that much," Vivek Pandey, fund manager of SBI Magnum Midcap Fund, said.
Others such as Birla Sun Life Mid Cap, DBS Chola Midcap, DBS Chola Small Cap, Franklin Indian Smaller Companies, JM Mid Cap, Sundaram BNP Paribas Select Small Cap and ING Midcap have given returns between 80% and 90% in the same period. Even the laggards have managed to deliver 60-65% returns in the last 3 months.
With benchmark indices mainly consisting of large caps and most stocks having delivered returns at the start of a bull run, smaller companies maintain rally in the next wave, point out analysts.
"It is interesting to note that while large caps typically go into consolidation mode after a strong monthly performance (May), the tailwind in the case of midcaps seems to be substantially better. This trend could be likely attributed to a contraction in the valuation gap as investor sentiment improves," Bharat Iyer of J P Morgan India said.
The presence of performing stocks as top-10 holdings that gave 100% returns such as Federal Bank, Balrampur Chini Mills, Bank of Baroda, Rural Electrification Corporation, Mphasis BFL, Mundra and stocks that 'tripled' in value such as Voltas and Sintex Industries in the same period widened gains for many funds. In the same period, BSE Midcap Index has appreciated by 100% and BSE Small Cap Index has jumped by around 110%.

Source: http://timesofindia.indiatimes.com/Business/India-Business/MFs-investing-in-small-cos-clock-big-gains/articleshow/4622748.cms