MFs looking for easing of entry load ban

Mutual fund houses had cheered news that UK Sinha, a man from the MF industry, could be the next Securities and Exchange Board of India (SEBI) chief. But CNBC-TV18’s Mitra Joshi and Gopika Gopakumar report that this appointment may not mean the end of their problems.

Hit by redemptions, dwindling assets-under-management, and a drop in folios, the mutual fund industry has been clamouring for a lifting on the ban on entry loads. It says only around one percent of the country's population invests in mutual funds and easier norms are needed, if deeper penetration is to be achieved.

HN Sinor, CEO, AMFI said, “Perhaps, this series of changes that have come about, I think it has in a way disrupted the industry. The industry could not really settle down to many of the quick changes which have come about. Ultimately, the industry has to have an orderly growth and for that we need to have proper careful regulation.”

So when UK Sinha's name did the rounds as SEBI Chief CB Bhave's possible successor, fund houses were happy. They hoped that given Sinha's MF background, SEBI would look kindly on a proposal to review the ban on entry load, among other regulatory changes. But this may be easier said than done.

KN Vaidyanathan, ED, SEBI said, “If you ask me, it is a closed chapter. It is decisively in the favour of the investor. It has brought transparency. It has improved AMC profitability.”

SEBI has also made it clear that the regulation of mutual fund distributors will happen over a period of time. This includes mandatory examinations to qualify as an impaneled and authorised distributor.

Source: http://www.moneycontrol.com/news/mf-news/mfs-looking-for-easingentry-load-ban-_518975.html

ICRA Mutual Fund Awards, 2011 announced

• MFs in 15 categories recognized in the 8th Annual ICRA Mutual Fund Awards

• HDFC Mutual Fund awarded as the Fund House of the Year in the equity category; Reliance Mutual Fund wins the Fund House of the Year award in debt category

ICRA Limited along with ICRA Online Limited (ICRON) presented the prestigious Fund House of the year, 2011 awards to HDFC Mutual Fund and Reliance Mutual Fund in the equity and debt category respectively for their outstanding performance.

At the 8th annual ICRA Mutual Fund Awards function, held in Mumbai last evening, HDFC Mutual Fund bagged the maximum number of awards with 16 in the equity category and 2 in debt category. This was followed by Reliance Mutual Fund and Birla Sun life Mutual Fund who won a total of 6 awards each. J P Morgan Mutual Fund, LIC Mutual Fund, UTI Mutual Fund, DWS Mutual Fund, Fidelity Mutual Fund, Kotak Mahindra Mutual Fund and BNP Paribas Mutual Fund were among the other prominent winners.

Speaking at the occasion, Mr. P K Choudhury, Vice-Chairman of ICRA Limited & CEO of Group ICRA, said, “I whole heartedly congratulate all the winners tonight. The fantastic growth of the mutual fund industry and its ability to reach across to lakhs of investors clearly indicates the enormous potential for the industry in the years to come and significant milestones that could be achieved as we move forward. We are clear in our mind that the Indian mutual fund industry is poised to take on emerging challenges and become a significant enabler in the greater goals of achieving financial inclusion for a majority of the population in India”.

The eighth edition of the annual event had Mr. Robert Fauber, Senior Vice President, Moody’s Corporation as the Chief Guest. Mr. D N Ghosh, Chairman, ICRA Ltd gave the welcome address, while a special address was delivered by Mr. K N Vaidyanathan, Executive Director, Securities and Exchange Board of India (SEBI) and Mr. H N Sinor, Chief Executive, Association of Mutual Funds in India (AMFI). The function was attended by a host of eminent persons from the Banking and Financial Services Industry, besides the media, and of course, members of Group ICRA.

The awards ranged from trophies for the Best Performing Mutual Fund Schemes in the country during the one- and three-year periods ended December 31, 2010, to Fund House of the Year awards in the Equity and Debt categories. In total, there were 15 categories. While the top 4.6% funds in each category qualified as 5-Star Funds, the best among these was named the 7-Star Fund. The 5-Star Funds were awarded a Certificate and a Trophy each, while the 7-Star Funds were given 7-Star Gold Awards and Certificates.

[A detailed list of the Winners of the various ICRA Mutual Fund Awards, 2011 and the associated details are available on the websites www.icraonline.com and www.mutualfundsindia.com]

About ICRA: ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services companies as an independent and professional Investment Information and Credit Rating Agency. The international Credit Rating Agency Moody’s Investors Service2 is ICRA’s largest shareholder. Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited Company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange.

About ICRA Online: ICRON, a wholly-owned subsidiary of ICRA Limited, is a leading information services, outsourcing solutions and technology solutions provider and caters for some of the biggest names in the financial services sector in India and abroad, which is a testimony to its product quality, commitment and credibility. ICRON was incorporated in January 1999 and has over the period since then established itself as an independent and credible source of authentic information and software solutions for financial services as well as an outsourcing solutions provider.

The Ranking Methodology ICRA Mutual Fund (MF) Awards seek to inform investors and Mutual Fund intermediaries of the category-wise relative performance of MF schemes. The awards are based on the proprietary ranking methodology developed jointly by ICRA and ICRON.

For an MF scheme to be eligible for the ranking: · it must have declared its net asset values (NAVs) for one and three years (depending on the ranking horizon); · it must have made full portfolio disclosure (monthly/quarterly) during the ranking horizon; · its size should have been larger than 10% of the category’s median, average assets under management (AUM) and 20% in case of liquid and ultra short-term categories ; and · there should have been at least five schemes in the category. [Note: The ranking process considers only growth-oriented, open-ended equity and debt schemes, institutional plans are considered in liquid and ultra short-term schemes categories].

The ranking methodology dynamically focuses on the market reality, that is, on the actual investment pattern and portfolio composition of an MF scheme rather than on its stated objectives, thereby acknowledging the fund manager’s prerogative to devise and follow her/his particular investment style.

The scoring model for the final ranking takes into account: the Risk-Adjusted Returns; the Average Maturity; the AUM size; the Credit Indicators; and the Portfolio Concentration. Once the scoring is done, the MF schemes are ranked 1-Star, 2-Star, 3-Star, 4-Star, and 5-Star on the basis of their individual scores. The highest scorer among all schemes ranked 5-Star in a particular category is named the 7-Star Fund of that category, provided the fund’s AUM is above Rs. 100 core, or it is higher than the category average, whichever is lower.

The Fund House of the Year Award is given to the fund house with the best performance in its category, that is, Equity or Debt. To qualify for the Award (for either category) a fund house needs to have at least one scheme ranked 3-Star or above in at least three Debt or Equity categories, as defined by ICRA. The scoring also takes into account qualitative factors, which are assessed from the response of the AMCs to a due-diligence questionnaire administered by ICRON.

Source: http://www.business-standard.com/india/news/icra-mutual-fund-awards-2011-announced/423817/

IDFC Tax Advantage (ELSS) Fund declares dividend

IDFC Mutual Fund has announced a dividend of 25% (Rs. 2.5 per unit on Face Value of Rs.10), under the dividend option of IDFC Tax Advantage (ELSS) Fund. The record date for the dividend as been fixed as February 4, 2011.

All investors registered under the dividend option of IDFC Tax Advantage (ELSS) Fund as on February 4, 2011 will receive this dividend. The NAV of the scheme under the dividend option as on January 28, 2011 was Rs 15.514.

IDFC Tax Advantage (ELSS) Fund is an open-ended ELSS scheme. The investment objective of the scheme is to seek to generate ong term capital growth from a diversified portfolio of predominantly equity and equity related securities.

Source: http://www.moneycontrol.com/news/mf-news/idfc-tax-advantage-(elss)-fund-declares-dividend_517733.html

Bhave’s great service to the Indian securities market

Sebi’s first top quality order under Bhave was in the case related to Pyramid Saimira Theatre Ltd in April 2009.

Market regulator Securities and Exchange Board of India’s (Sebi) current chairman C.B. Bhave’s term is set to expire in February. How does his performance compare with some of his predecessors? Put simply, the difference is as stark as night and day.

The primary distinction is the improvement in the enforcement function at Sebi. Before his term began in February 2008, Sebi’s orders were almost invariably challenged successfully at the Securities Appellate Tribunal. It was almost as if the regulator didn’t have the strength to enforce rules.

Things didn’t improve immediately after Bhave stepped in, but that was because it took some time to hire the right people and create the right institutional framework to strengthen the enforcement function. Sebi’s first top quality order under Bhave was in the case related to Pyramid Saimira Theatre Ltd in April 2009. The investigation done by Pradnya Saravade, an Indian Police Service officer, was top-notch, and the case made against the culprits was watertight.

And it wasn’t a flash in the pan. There were other well-investigated and well-drafted orders such as the one against front-running in HDFC Mutual Fund. In both the above-mentioned cases, the culprits were brought to book.

One important feature about the improvement in the enforcement function is that Sebi under Bhave hasn’t been scared to take on large and influential industrial houses. A case in point is the recent consent order issued to the Anil Ambani group. While one can argue that a consent order does not amount to admission of guilt, it’s unlikely that this large industrial house would have agreed to a Rs50 crore fine and a one-year hiatus from the markets if Sebi’s case wasn’t very strong. The regulator has also taken on the Sahara group and the Financial Technologies-MCX group with well written orders.

The improvement in enforcement is crucial because it ensures a smoothly functioning marketplace. India has a reasonably good market infrastructure and market rules that have been refined over the years. While there is certainly place for improvement in some of these rules, it’s imperative that existing rules are observed by market participants, so that markets continue to function smoothly and market integrity is maintained. Thanks to some of its tough orders, market participants will think twice about breaking rules. This has been a refreshing change in the Indian market place.

Another major change under Bhave—one which has received much more attention—is the ban on entry load charged by mutual funds. In a related move, Sebi also took on unit-linked plans (Ulips) offered by insurance companies and the net result of all this is that investors are now saving substantially on commissions on these investment products.

Of course, the counter argument is that the quantum of investments has fallen since the ban was imposed and that the move was done in a hasty manner. But on the whole, investors have gained by saving on unnecessarily high commissions, especially on new fund offers by mutual funds and Ulips.

The regulator has also made many changes in the processes involved in the primary market, such as the introduction of Asba (Application Supported by Blocked Amounts), and this has improved the system. There have been a number of changes in the secondary market as well, such as the introduction of direct market access and algorithmic trading and the reversal of the ban on participatory notes.

Another first under Bhave is that Sebi has started to give stock exchanges a little flexibility in market design—starting with flexibility in choosing trading hours (within a prescribed band). Exchanges also have four choices with equity stock options, with the regulator permitting European and US style options and a choice between cash-settled and physically settled options. Of course, much more needs to be done in this area as there is still a lot of micro management by Sebi; but at least a start has been made.

Other highlights from Bhave’s term include his decision to reject a demand to ban short selling in late 2008, while many regulators world over were imposing a ban. And while there has been a chorus of protests that Sebi is anti-competition, Bhave did relax the rules for MCX-SX so that it could launch currency futures despite not meeting the prescribed shareholding norms at the time of launch.

However, because of his tough stand on the mutual fund entry load issue and some other tough orders, many market participants tend to disagree that Bhave’s term as Sebi chief was a fruitful one. Another criticism is that he has been rigid about some policies and hasn’t taken market feedback seriously on issues such as the design for interest rate futures and securities lending and borrowing.

But one must note that three years is a short time and quite a few changes have been in the primary and secondary markets, and the enforcement function. One could argue that a lot more could have been done; but, as pointed out earlier, compared with his predecessors, Bhave has done a great job.

Source: http://www.livemint.com/2011/01/31221944/Bhave8217s-great-service-to.html

UTI MF to start financial literacy drive; partners HDFC Bank

UTI Mutual Fund is starting its second round of pan- India .investor education and financial inclusion initiative from February 2 to spread awareness about benefits of investing in mutual funds .

As part of the initiative, christened as Swatantra, two UTI knowledge caravans will travel across Kerala, Karnataka and Tamil Nadu, starting from Thiruvananthapuram, to spread awareness about financial planning, UTI MF CMO Jaideep Bhattacharya said.

For this, UTI MF has tied up with HDFC Bank, the largest distributor of mutual fund products, which would arrange the investor meets across rural areas in Southern India. "We aim to impart financial literacy to a larger subset of rural customers across the 250 rural and semi-rural branches of HDFC Bank," HDFC Bank Senior Executive VP (Third Party Products & Private Banking) Nitin Rao said.

During the journey of 56 days, investors meets would be held in various centres across 130 towns. The initiative is in partnership with the Ministry of Corporate Affairs.

"With the high prices of essential commodities it is very essential that investors get high return on their investments. We are customising the initiative as per the local language to spread awareness about the convenience of buying and selling MFs," Bhattacharya said.

UTI MF hopes the initiative would help expand the fund industry's reach and bring in new investors as HDFC Bank will ask its customers to invest in mutual funds. "If savings has to move to investments, it is necessary that financial literacy is imparted to people in regional language," he added.

In its first leg of investor education initiative beginning July 6, 2010, UTI MF had arranged for three specially-designed vans to move across the country over 100 days. During this journey, more than 1,300 investor meets will be conducted in 300 cities and 100 days with an estimated 15 lakh participants.

The investor education initiative would see UTI MF officers and advisors talking about financial literacy, that would help individuals take prudent investment decisions.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/uti-mf-to-start-financial-literacy-drive-partners-hdfc-bank/articleshow/7389520.cms

Fidelity India Children's Plan: Towards a set goal

Investing with a pre-determined goal in mind helps investors choose the right kind of investment avenues besides systematically saving over the given time-frame.

Fidelity India Children's Plan, is an open-ended mutual fund scheme which, through different asset allocation patterns, allows investors to invest towards a set goal. The plan has three different funds in which to invest in – Education Fund, Marriage Fund and Savings Fund.

Investments in the schemes are allowed only on behalf of a minor by parents and a few others.

Balanced style

The Education Fund has a mandate to invest up to 70 per cent of its portfolio in equity and the rest in debt instruments; the strategy being similar to a balanced fund. It would be interesting to take note of the kinds of returns equity-oriented balanced funds have managed in the past.

Some of the best performing funds such as HDFC Prudence, DSPBR Balanced and Birla Sun Life 95 have delivered compounded annual returns in the range of 18-27 per cent over a 10-year period. Over a five-year time-frame the returns hover around the 18-20 per cent levels. Equity-oriented balanced funds as a category, have delivered around 13 per cent compounded annual return over a five-year horizon.

Investments in balanced funds through the SIP (systematic investment plan) mode too would have delivered impressive returns, although a few percentage points less than the lump-sum returns mentioned above over a 10-year period.

Overall, while balanced funds have lagged market returns over short time-frames of, say, six months, their long-term track record has been impressive.

Asset-allocation

The second product – Marriage Fund has a mandate that allows it to invest 70 per cent in equity, 20 per cent in gold ETFs (exchange traded funds) and 10 per cent in debt instruments.

With gold being an important ingredient in Indian marriages, the fund seeks to provide a hedge against rising gold prices. In rupee terms, gold has delivered a compounded annual return of nearly 22 per cent over the last five years.

The Savings Fund has a mandate to invest its entire portfolio in debt. Switching between goals is allowed and investors can also consider moving the proceeds to the Savings Fund, once their return expectations are met.

A higher equity portion in the first two plans increases the risk profile, with the second also having to contend with volatility in gold prices, which can be considerable.

Long-term wealth

Equity-oriented balanced funds have turned out to be good options for investors to build long-term wealth even while protecting their portfolio from wild market swings.

Fidelity's Children's Plan may see stability in assets managed, as the fund has a relatively steep exit load (a possible deterrent to redemption) in the initial years in the case of its Education and Marriage funds.

Source: http://www.thehindubusinessline.com/features/investment-world/mutual-funds/article1137799.ece

Tata MF Announces Change in Key Personnel

Tata Mutual Fund has announced the appointment of Mr. Hitungshu Debnath as the Head Sales & Marketing of Tata Asset Management Ltd. with effect from 14 January 2011.

Mr. Hitungshu Debnath is aged 43 years and holds Certified Financial Planner, PG in Marketing Management and Baccalaureate in Optometry as his qualification. He has over 19 years of experience.

Source: http://www.adityabirlamoney.com/news/451665/10/22,24/Mutual-Funds-Reports/Tata-MF-Announces-Change-in-Key-Personnel

Religare MF Announces Change in Key Personnel

Religare Mutual Fund has announced that Mr. Krishna Venkat Cheemalpati has joined Religare Asset Management Company Ltd. as Fund Manager - Fixed Income with effect from 18 January 2011. Mr. Krishna Venkat Cheemalpati is aged 40 years and holds BE. (ECE), PGDBA, CFA (ICFAI Hyderabad) as his educational qualification. He has more than 13 years of experience in Fixed Income market. In his earlier assignment he was the Chief Investment Officer with Reliance General Insurance Company Ltd. (from October 2008 - 17 January 2011).

Pursuant to resignation of Mr. Abbas Ratnani - Fund Manager - Equity, schemes such as Religare Arbitrage Fund, Religare AGILE Fund and Religare AGILE Tax Fund will be managed by Mr. Vetri Subramaniam.

Mr. Anil Saxena has resigned from the Board of Directors of Religare Asset Management Company Ltd. with effect from 12 January 2011.

Source: http://www.adityabirlamoney.com/news/451691/10/22,24/Mutual-Funds-Reports/Religare-MF-Announces-Change-in-Key-Personnel