IDFC Asset Allocation Fund to be Transacted through Online MF Platform

IDFC Mutual Fund offers an alternate transaction platform to facilitate purchase/subscription and redemption of units of IDFC Asset Allocation Fund (Aggressive plan, Conservative Plan and Moderate Plan) through the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) – Mutual Fund Service System (MFSS). The facility will be offered from 19 August 2010.

Units can be held as per the choice of the investor, in physical or depository mode.

IDFC Asset Allocation Fund is a fund formed with primary objective to generate capital appreciation through investment in different mutual funds schemes primarily local funds based on a defined asset allocation model.

Source: http://www.apollosindhoori.cmlinks.com/MutualFund/MFSnapShot.aspx?opt=9&SecId=10&SubSecId=22,24#

Mutual funds dump equities worth Rs 1432 crore in August

Mutual funds offloaded shares worth a net Rs 169.90 crore on Tuesday, 17 August 2010, lower than Rs 334 crore on Monday, 16 August 2010.

The net outflow of Rs 169.90 crore on 17 August 2010 was a result of gross purchases Rs 565.40 crore and gross sales Rs 735.30 crore. The key benchmark indices ended almost unchanged in range bound trade on that day.

Mutual funds have sold shares worth a net Rs 1432.20 crore this month so far, till 17 August 2010. Mutual funds had dumped shares worth a net Rs 4405.30 crore in July 2010.

Source: http://www.apollosindhoori.cmlinks.com/MutualFund/MFSnapShot.aspx?opt=9&SecId=10&SubSecId=22,24#

Equity edge ensures high returns

HDFC Prudence Fund, launched on February 1, 1994, is one of the oldest funds in the equity-oriented hybrid funds category (also called as balanced funds). As of July, the fund’s average assets under management (AUM) were Rs 4,558 crore.

It has been ranked ‘Crisil Mutual Fund Rank 1’ for the past three quarters and has held the top rank on 22 occasions over the 10-year history of Crisil Mutual Fund Ranking. The high consistency in rankings is an indication of a blend of superior performance and disciplined portfolio management.

Investment style

It seeks to benefit from both asset classes, ie, it aims to provide capital appreciation of equities and stability of debt market instruments. During the last three years, the fund maintained an average 75 per cent exposure to equities. It’s aggressively managed, showing a clear tilt towards equities over the last three years wherein the fund remained invested largely in equities, despite 2008’s down cycle.

Performance

The fund has capitalised on equity market gains and outperformed the benchmark index (Crisil Balanced Fund Index) with a sizeable margin. It has generated nearly twice the benchmark index returns for various periods analysed (three months to five years) — much higher than its peers. During the downturn of 2008, the fund lost 43 per cent of its net asset value (NAV) from January 2008 (market peak) till March 2009, compared to 34 per cent of the Crisil Balanced Fund Index and 51 per cent of the S&P CNX Nifty. The fund’s performance vis-à-vis its peers clearly stands out during the market recovery phase after March 2009. Till date, the fund’s NAV multiplied 2.5 times (122 per cent gain) from its lowest point in March 2009, while the benchmark index returned 52 per cent and the S&P CNX Nifty gained 77 per cent.

Portfolio analysis

Within equities, the fund maintains a fairly diversified portfolio exposure across market capitalisation with a bias towards large-cap stocks. The average fund exposure to stocks in the BSE 100 and CNX Midcap index during the last two years is around 43 per cent and 18 per cent of the total portfolio.

The average number of stocks in the portfolio for the last two years is 61, indicating good stock-wise diversification. Within the debt portfolio, the fund has maintained good asset quality with a predominant exposure (21 per cent) to government securities and AAA/P1+ rated papers over the last two years.

Sector trends

Banks, pharmaceuticals and financial institutions have been the most preferred sectors in the fund’s portfolio over the last three years, with exposure to these sectors being over a fourth of total assets. Banks, housing finance and consumer goods sectors were the largest contributors to total gains of the fund during the last two years.

Source: http://business-standard.com/india/storypage.php?autono=404876

Pramerica Asset Managers to launch first NFO on Aug 23

Pramerica Asset Managers, the Indian arm of the US-based Prudential Financial, today announced the launch of its first product, which would invest in debt securities.

The Pramerica Liquid Fund new fund offer (NFO) would open for subscription August 23, and close on August 26, Pramerica said in a statement.

The open-ended fund would invest the corpus in debt and money market instruments and the performance would be benchmarked against the CRISIL Liquid Fund Index.

"The new fund is aimed at creating value for investors with a low risk appetite," Pramerica Managing director and CEO Vijai Mantri said.

The fund would act as an ideal short term investment avenue for surplus funds and also the dividend from this scheme is tax exempted.

"The fund presents an option to investors to benefit from presently rising interest rates. Investors can also use this fund for investing cash as part of asset allocation," Pramerica Executive Director & Chief Information Officer (Fixed Income) Mahhendra Jajoo said.

In May, the company had received market regulator SEBI's approval for starting mutual fund operations in the domestic market.

With this approval, Pramerica has joined the league of Italian bank UniCredit's arm Pioneer Global, Japan's Shinsei, South Korea's Mirae Asset and France's Axa, who have launched their products in the country over the past three years.

Globally Prudential Financial manages assets worth $693 billion.

The US-based parent Prudential Financial has already infused $7.5 million into the Indian asset management company.

Source: http://www.business-standard.com/india/news/pramerica-asset-managers-to-launch-first-nfoaug-23/105517/on

AMCs Not to Accept Third-party Payments

The Association of Mutual Funds in India (AMFI) has asked fund houses not to accept third party payments barring a few exceptions.

In a best practice guidelines circular issued to AMCs on Monday, AMFI said that third-party payments would only be accepted in case of payment by “parents/gand-parents/related persons on behalf of a minor for a value not exceeding Rs 50,000 (each regular purchase or per SIP installment); payment by employer on behalf of employee under systematic investment plans (SIP) through payroll deductions and custodian on behalf of an FII or a client.” However, the mutual fund body recommends that in the above mentioned exceptional cases, AMCs should have appropriate controls in place to carry out verification as required under the Prevention of Money Laundering Act (PMLA).

The AMCs should, therefore, determine the identity of the investor and the person making payment, that is, mandatory KYC for investor and the person making the payment; obtain necessary declaration from the investor and the person making the payment. Declaration by the person making the payment should give details of the bank account from which the payment is made and the relationship with the beneficiary.

It has also asked AMCs to verify the source of funds to ensure that funds have come from the drawer’s account only. AMFI further elaborates the process for identifying third-party payments. The procedures recommended include asking the investor for details of his pay-in bank account (account from which a subscription payment is made) and his pay-out bank account (account into which redemption /dividend proceeds are to be paid); seeking a certificate from the issuing banker for subscriptions through pre-funded instruments such as pay order, demand draft, banker’s cheque, etc.

If the payment is made by RTGS, NEFT, ECS, bank transfer, etc., a copy of the instruction to the bank stating the account number debited must accompany the purchase application.

If payments are received via channel distributors, AMCs should ensure that the settlement model has satisfactory checks and balances against third-party payments.

The guidelines further say that for payments through net banking, AMCs should endeavour to obtain the details of the bank account debited from the payment gateway service provider and match the same with the registered pay-in accounts.

AMCs should implement the process for identifying third-party cheques within 90 days of the issuance of the circular or by November 15, 2010.

Source: http://new.valueresearchonline.com/story/h2_storyView.asp?str=14990

KYC Must for Any Investment Amount

The Association of Mutual Funds in India (AMFI) has asked all asset management companies (AMCs) to make KYC (know-your-customer) norms mandatory for all non-individual and NRI investors irrespective of the amount of investment.

Under the present norm, KYC is mandatory only for investments above Rs 50,000.

In a letter sent to AMCs, AMFI has said that the mutual fund industry should go ahead with making KYC mandatory, irrespective of the amount of investment for all non-individual investors/NRIs/channel investors (high risk category) with effect from October 01, 2010. These categories will include corporate, partnership firms, trusts, HUF (Hindu undivided family), NRI and investors coming through channel distributors.

However for individual investors, a decision would be taken only after feedback from the Securities and Exchange Board of India (SEBI).

The AMFI committee on KYC had made the proposal to lower the current threshold amount from Rs 50,000 to zero in a phased manner for different categories of investors and the proposal is still under consideration of SEBI. However, the AMFI committee has recommended that even as the proposal is pending clearance from SEBI, the mutual fund industry should remove the limit of Rs 50,000 for all non-individual investors and NRIs investors.

KYC norms were implemented from February 1, 2008, for all investors investing in mutual funds schemes amount of Rs 50,000 and above. It was done in order to comply with the Prevention of Money Laundering Act 2002.

For the convenience of investors, all mutual funds have made special arrangements with CDSL Ventures Ltd. (CVL), a wholly owned subsidiary of Central Depository Services (India) Ltd (CDSL).

Source: http://new.valueresearchonline.com/story/h2_storyView.asp?str=14989

Natural resources funds, unnatural returns

Another scheme — the Tata Natural Resources Fund — has entered this space, but there is nothing which this fund can deliver that existing equity funds cannot

Three are three natural resources funds which were all launched in 2008 when the commodities boom was at its peak. Two of the three have beaten their respective benchmarks. A fourth one is now being launched - by Tata Mutual Fund. Is it worth investing in it? Not really. Look at how the existing natural resources funds have invested their money. The label is a misnomer.

DSP BlackRock Natural Resources & New Energy Fund manages a corpus of Rs180.50 crore as on 30th July. The fund has mainly invested in Indian companies. Its top five picks are Castrol India (10.12% net investments), SRF (4.86%), Hindustan Petroleum Corporation (4.54%), Indian Oil Corporation (4.52%) and Coromandel International (4.49%). The fund has 26.71% exposure towards mid-caps, 47.11% in small-caps and 23.88% in large-caps. The fund launched in April 2008 has posted a net asset value (NAV) return of 16% when its benchmark BSE Metal Index slipped by -0.74%, outperforming its benchmark by far. However, why a natural resources fund should have the BSE Metal Index as the benchmark is unclear.

Reliance Natural Resources Fund launched in February 2008 has been an underperformer. The fund has delivered 0.17% return since inception while its benchmark BSE 200 edged up 1.35% during the same period. Again, why should a natural resources fund have BSE 200 as the benchmark is a question. The fund had a corpus of Rs3,296.88 crore as on July 2010. Its major exposure was in Indian companies like Oil & Natural Gas Corporation, Reliance Industries, Hindustan Petroleum Corporation, Tata Steel and Bharat Petroleum Corporation, etc. The fund also has investments in foreign firms like Potash Corp of Saskatchewan, Peabody Energy Corp, General Electric Company, CSX CORP, Caterpillar, Macarthur Coal, BP Global, JGC ORD, Xstrata Plc and Atlas Energy Inc. It is impossible for Indian investors to know whether these stocks are worth the investment or not.

The third scheme, Sahara Power & Natural Resources Fund launched in June 2008 has been the top performer. The fund posted NAV return of 19% since inception while its benchmark S&P Nifty is up 12.34% between the same period. As on July 2010, the fund had a tiny corpus of Rs6.72 crore. Its top picks are Uflex Ltd (3.93% net investments), Gas Authority of India Ltd (3.59%), Rallis India Ltd (3.47%), Bharat Heavy Electricals Ltd (3.26%) and Hindustan Petroleum Corporation Ltd (3.22%).

The latest to join the natural resources bandwagon is Tata Mutual Fund, which recently filed a draft offer document with the Securities and Exchange Board of India (SEBI) to launch its open-ended equity scheme called 'Tata Natural Resources Fund' (TNRF). The fund comes with two plans - 'Plan A' and 'Plan B'.

The fund (Plan A) aims to invest in companies principally engaged in the discovery, development, production or distribution of natural resources in various economies of the world including India. At least 51% of the corpus would be invested outside India while the 'Plan B' would invest predominantly in India.

The Plan A scheme will be benchmarked against the 'MSCI World Energy Index' (70%) and 30% against the BSE 200. 'Plan B' will be benchmarked against the BSE 200 to the extent of 65% and MSCI World Energy Index to the extent of 35%. The benchmark is a complex concoction designed to justify the label. But investors don't really need it. There is nothing which this can fund can deliver that existing equity funds cannot.

Source: http://www.moneylife.in/article/8/8207.html

Invest Rs 11K a month, get Rs 1 cr in 20 yrs

Here’s what independent India has achieved. From 1951 to date, our economy has grown from $21 billion to $1.2 trillion.

That’s over 60 times in 60 years. From the 3-4% Hindu rate of growth in the pre 90s, India has transformed into one of the fastest growing economies in the world. What’s more, in six to seven years this GDP will further double.

The opportunity today is ripe to achieve a different kind of freedom. Freedom that will help secure the future of ourselves and our loved ones. I call it financial freedom.

When it comes to achieving freedom there are no short cuts. Just as our country’s freedom was achieved through a concerted effort, so would financial freedom. It won’t happen in a day, but it will happen. What we need to do is follow some basic principles.

The first is to have a systematic and long-term approach to investing. We need to review our risk profile and allocate our savings across different asset classes. As a country we save over 35% of our GDP. But are we investing it judiciously? Most people are risk averse and hence put their full money in bank fixed deposits. While that may be safe but it may not give you adequate returns, which may not even cover the base inflation. Investing some portion of your money into equity as an asset class is very important.

Since the inception of the Sensex in 1979, the Indian stock markets have given around 17% annualised returns. Rs 1 lakh invested in the stock markets in 1979 would today be worth Rs 1.3 crore. At a 12% rate of return; if you invest Rs 11,000 every month in an equity mutual fund through an SIP mode, it will be over Rs 1 crore in just 20 years. That’s the power of compounding. If we take a long-term perspective there is enough money to be made to achieve financial freedom. The trick lies in diversifying investments, investing systematically, and over a period of time.

The second is the use of knowledge and expertise. We spend most of our time and effort earning money, and hardly any managing and growing it. The key to growing wealth lies in knowledge. Lack of knowledge means lack of understanding. And lack of understanding makes us oblivious to the myriad opportunities around us. Many of us are fearful of the complexity managing money brings. Managing money is not to be feared, but to be understood. It is only when we know more that we will fear less. And if we do not have the time or resources to understand how to manage money, do not feel shy to engage the services of an expert. Besides losing money, the biggest detriment to financial freedom is to let our wealth stagnate.

And last but not the least is the challenge of managing our emotions. A task easier said than done. From Dalal Street to Wall Street, greed and fear are the two most powerful words which can make you lose a fortune. But as someone said: “Be greedy when others are fearful; be fearful when others are greedy.” Be rational in your approach—research before you invest, not after. And once you have done so; have the conviction to stick to your game plan.

We live today in exciting times. The Next Trillion Dollars of India’s GDP growth presents us a once-in-a-lifetime opportunity for creating and growing wealth. Sixty-three years ago, the founders of our nation helped us achieve freedom. Today, it’s time for us to achieve a different kind of freedom— Financial Freedom.

Source: http://economictimes.indiatimes.com/Features/Sunday-ET/Money--You/Invest-Rs-11K-a-month-get-Rs-1-cr-in-20-yrs/articleshow/6313102.cms?curpg=2