SIP rise helps MFs brake pace of equity folio loss

The domestic fund industry has been able to apply brakes on the pace with which it was losing its equity folios.

So far, in the second half of the current financial year, fund houses have lost a little over 200,000 folios. This is less than what the industry had lost in every single month during the first half.

The industry had witnessed a loss of close to 1.7 million folios in the equity segment during April-September, close to 300,000 every month. According to the Securities and Exchange Board of India, as on February 2011, industry’s equity folios were 39.2 million, against 39.4 million at the end of the first half of 2010-11.

“A large number of systematic investment plans (SIPs) brought this reversal. However, it is too early to say if it is an evolving trend,” says H N Sinor, chief executive officer of the Association of Mutual Funds in India. On an average, there is a monthly addition of 100,000 SIPs every month, adds Srinivas Jain, chief marketing officer of SBI MF. Agrees Karan Datta, national sales head at Axis MF: “Redemption levels have come down a bit, besides higher SIP growth.” Though it’s an encouraging trend for the industry, which has been hit hard and especially on the equity side of the business, market observers can’t say if it would be a sustained trend. For the year so far, equity schemes are still facing a net outflow of Rs 13,281 crore against a net inflow of Rs 2,611 crore during the previous year’s corresponding period.

Except the first month of the second half, inflows in the equity segment has seen a consistent improvement. In fact, February was marked by a record net inflow in equity schemes since the entry load ban came into effect in August, 2009. More, last month was the third in a row that industry saw money flowing into equity schemes. The sales of equity-related schemes in February, including equity-linked saving schemes, were marginally up at Rs 6,038 crore against Rs 5,969 crore in September.

However, compared with the same month last year, sales of equity-related schemes are up 10 per cent against Rs 5,486 crore in February 2010.

Currently, the industry has a little over 40 competitors, with equity asset under management of around Rs 1.9 lakh crore. The number of overall folios in the categories, including income funds, equity and exchange-traded funds, is 4.71 crore.

Source: http://www.businessstandard.com/india/news/sip-rise-helps-mfs-brake-paceequity-folio-loss/429267/

Invest 5-10% of your portfolio

After launching a Nifty-50 remix fund, Motilal Oswal Mutual Fund’s recent offering — MOSt Shares Nasdaq 100 — continues with its policy of launching exchange-traded funds (ETFs).

The move seems timely because the US markets have performed better than the Indian markets in recent times. Since the beginning of the year, the Nasdaq 100 has returned 14.45 per cent, whereas the Sensex only 1.74 per cent. The scheme plans to invest 95-100 per cent in the shares of Nasdaq 100 companies.

Also, ETFs are cheaper than equity-diversified funds, in terms of expense ratio. The total expense ratio of MOSt Shares Nasdaq 100 will be one per cent, as against an average of two per cent for other equity-diversified funds.

It is the first ETF in India which will invest in shares listed on the NASDAQ 100, and the second index tracking ETFs after Benchmark AMC’s Hang Seng Bees.

While these are the good news, there are some restrictions as well. The fund does not have a systematic investment plan (SIP) option yet. Although the fund will invest in equities, it will be taxed as debt fund. It implies that there will a long-term tax on capital gains at 10 per cent with indexation benefits and 20 per cent, otherwise. In the short-term, capital gains will be added to income and taxed, according to the tax slab.

The fund house has said investors in the new fund offering (NFO) period — between March 16 and 23 — would get double indexation benefits such as a fixed maturity plan. The scheme will be listed at the Bombay Stock Exchange and the National Stock Exchange on April 4.

For investors, who want to take advantage of the turnaround in the US markets, this fund is a good opportunity. The international flavour, that is, being able to invest in scrips such as Microsoft, Google, Amazon, Yahoo and eBay, is definitely an added attraction.

But don’t go overboard. Financial planner Radhika Gupta says, “While there are very good companies listed on the Nasdaq, they mostly belong to the information technology segment. This leads to overexposure in a particular sector.”

Alhough the US stock market has turned around this year, it has not performed exceptionally well in the last few years.

Investors in the Indian markets would have earned higher returns from the Sensex. In the last two and five years, the Sensex has returned 41.13 per cent and 10.48 per cent annually. In comparison, the Nasdaq-100 has returned 35.65 per cent and 5.7 per cent in the same periods.

Rajesh Tanna, AVP-MF at Bonanza Portfolio, says, “This product is mainly targeted towards high net-worth individuals. Retail investors do not really understand how the product works.” Ideally, if you are well-invested in Indian stocks, either through direct exposure or mutual funds, you can look at this fund.

This is a good portfolio diversifier. Invest only part – say, 5-10 per cent of portfolio – in this product.

Source: http://www.business-standard.com/india/news/invest-5-10your-portfolio/429273/

Product Crack| Mirae asset India-China consumption fund

Mirae Asset India–China Consumption Fund (MICF) is an equity diversified mutual fund scheme that aims to invest at least 65% of its corpus in Indian equities and the rest in Chinese equities. MICF will invest in consumer-oriented sectors, such as fast-moving consumer goods, banking, media and telecom. While fund manager Gopal Agrawal will manage the India portion of this scheme, Basavraj Shetty is the designated fund manager of the international portion of the portfolio, with assistance from Mirae’s Hong Kong office.

What works

A growing middle-class population and their rising income are two factors that will give a boost to the middle-class consumption and companies engaged in this sector. Mirae estimates that India’s middle-class spending will rise by 18% and China’s will increase by 15% over the next five years. Rising population of India and China is expected to boost demand for products manufactured by companies in the consumption space. For instance, the fund house expects Asia’s middle class population (excluding Japan) to grow at a compounded rate of 11% over the next five years. As per the five year plan released by the Chinese government, the minimum wage is expected to increase by 50% during the period from 2010 levels.

What doesn’t

China’s growth projections can paint an attractive picture, but with a country that is devoid of democracy and is tightly controlled by its government, it’s a bit tricky to navigate their projections. Further, though investing in foreign equity shares offers diversification, there isn’t much merit in looking overseas when the Indian equity market offers multiple options with scores of listed companies and equity mutual fund schemes that come with a decent track record. Mirae’s existing scheme that invests in China (Mirae Asset-China Advantage Fund) returned 10.42% in the past year. In other words, it navigated the recent volatility in Chinese equities reasonably well. However, in 2010, the fund underperformed equity diversified schemes that focused solely on India.

Mint Money take

Consumption is an attractive theme that most fund managers in India seem to have lapped on. However, ignoring India-specific funds—some of them with a good track record—and going abroad is completely your choice. If you must invest, an ideal time horizon would be not more than three years. Also, take minimal exposure if you must. A better alternative is to stick to a India-specific diversified fund.

Source: http://www.livemint.com/2011/03/21213836/Product-Crack-Mirae-asset-Ind.html

Reliance MF Declares Dividend Under Two Schemes

Reliance Mutual Fund has announced 24 March 2011 as the record date for the declaration of dividend on the face value of Rs 10 per unit under dividend options of following schemes:

Reliance Growth Fund: The quantum of dividend will be Rs 4 per unit for retail plan and institutional plan. The scheme recorded NAV of Rs 53.3177 per unit for retail plan and Rs 424.3054 per unit for institutional plan as on 17 March 2011.

Reliance Quant Plus Fund: The quantum of dividend will be Rs 2.50 per unit. The scheme recorded NAV of Rs 13.1006 per unit as on 17 March 2011.

Reliance Growth Fund is an open ended equity growth scheme which has the investment objective to achieve long term growth of capital by investing in equity and equity related securities through a research based investment approach.

Reliance Quant Plus is an open ended equity scheme which has the investment objective to generate capital appreciation through investments in equity and equity related instruments. The scheme will seek to generate capital appreciation by investing in an active portfolio of stocks selected from S&P CNX Nifty on the basis of a mathematical model.

Source: http://www.indiainfoline.com/Markets/News/PrintNews.aspx?NewsId=3612548709

Investors flocking to short-term assets: Fidelity

Mutual fund house Fidelity International India today said domestic fixed income investors are increasingly going in for short-term products and keep shuffling from one fund to another, besides preferring individual stocks over industry segments.

"The fixed income products, especially those in the short-term cash segment, are growing at a faster pace now, as investors are looking for more stable income and expect positive returns in all market conditions besides keen on preserving their hard-earned capital," Fidelity International India Country Head Ashu Suyash.

Investors are also willing to consider investing in multiple asset classes, she added.

According to Suyash, of the Rs 7-trillion MF industry, Rs 5.65 trillion are fixed income-based funds while the rest Rs 1.35 trillion are equity-based. Over the past few quarters, investors have been flocking to fixed income funds.

On the problems faced by the MF industry, which has been reeling under a wave of regulatory interventions since a year, she said though fixed income funds look to be more promising now, for this market to bloom, a developed corporate bond market, coupled with FII participation, is a must.

"The predominance of bank funding and government bonds are impeding growth of this market segment in particular and overall domestic MF industry in general. Dominance of these factors make credit risk distribution skewed."

Fidelity International Global Investment Officer for fixed income segment Andrew Wells said Asian investors are also moving into to park their money with fixed income asset classes as they are on the look out for regular income and higher yields.

Source: http://www.indianexpress.com/story-print/764462/

The House That HDFC Built

This retail-investor focused fund house has grown 71-fold in 10 years

Think of it as reinvestment with a twist. HDFC Mutual Fund has launched a debt fund for cancer cure, which lets investors donate a part of or the full dividend to the Indian Cancer Society. After a decade of profitability and steadily growing assets under management (AUM), the latest offering is an innovative way of espousing philanthropy from this year’s winner of the Best Fund House in BW-Value Research survey of the mutual fund industry.

But Milind Barve, managing director of the fund’s asset management company (AMC), says this is not a one-off thing; the AMC will continue its focus on philanthropy and investor education, activities that investors will remember it for, besides its record of quality performance.

In the year of its launch, HDFC AMC, an offspring of HDFC Bank, collected Rs 1,238.13 crore (as on 31 March 2001) of average assets under management (AAUM); by December 2010 this figure was Rs 87,883 crore, a 71-fold increase in 10 years. Its profits for the year ended 31 March 2010, were Rs 208.36 crore, compared to Rs 129.11 crore in the previous year. The first year was the only year in which it missed paying a dividend. The performance speaks for itself: in 2010, the AMC had 22 top-rated funds, seven of which were 5-star rated (HDFC Top 200, HDFC Equity, to name two), and 15 were rated 4-star by Value Research. Franklin Templeton AMC and Birla Sun Life AMC are the next best performers.

Barve attributes this success to the AMC’s focus on the retail investor (much like the parent bank’s focus on the retail customer) and not spending too much resources developing new products. He believes in keeping his funds simple in order to make them investor friendly. Says Barve: “We believe passionately that the Indian market needs products that are not too innovative, or they become too complex for our investors.” The AMC has added only two new products in past five years and around 60 per cent of its assets come from retail investors.

So, besides the consistently high performance, what is it that helped the fund outshine other players in the business? “The focus was to build the retail business instead of going after the low hanging fruit of getting large amounts of money from a few corporate and large institutions,” says Barve. So much for the customer; but what about investments by the funds?

The story there is pretty much the same: buy valuable companies, look at potential growth, and take a good look at management. Simple, perhaps boring, but very effective. But Barve is going global: he will allow overseas investors to put money into his existing funds, using Credit Suisse’s marketing network.

But he is also concerned about the low penetration of MFs in India. “All of us relatively large players in the industry have a role in building the market,” says Barve, who may be wearing his hat as chairman of the Association of Mutual Funds of India when he says this. “It’s not about market share, or about being No. 1 or 2. Unless the market itself grows, we cannot.” His AMC has the resources to achieve some of that: a system of 111 service centres and nearly 36,500 distributors to further the cause.

Source:http://www.businessworld.in/bw/storyContent/2011_03_17_The_House_That_HDFC_Built.html

IDFC Mutual Fund announces dividend under its Tax Advantage Fund.

IDFC Mutual Fund has declared dividend under IDFC Tax Advantage (ELSS) Fund. The quantum of dividend for distribution is Rs 1 per unit. The investment objective of the scheme is to generate long term capital growth from a diversified portfolio of predominantly equity and equity related securities. The record date for dividend distribution is 23rd March 2011.

Source: http://www.mutualfundsindia.com/news_viwe.asp?news_headline=IDFC+Mutual+Fund+announces+dividend+under+its+Tax+Advantage+Fund@MF040

Equity mutual fund managers hoard cash

Volatility in the Indian equity markets has pushed fund managers to sit on cash and enter the market once valuations start looking attractive. Average cash levels of equity schemes in the Indian mutual fund industry have increased to 6.33% of the total portfolio in February (highest in the last six months) with few equity schemes keeping cash levels in the range of 10-20%. These cash levels have inched up even more, according to industry sources.

According to the Value Research data, in the month of January this year, the average cash levels were 5.73% while in December last year it stood at 4.47%. Market participants say that since the start of the current calendar year, fund managers have hiked their cash position as they feel that markets have not yet bottomed out and might fall further from the current levels. In the month of January and February, Sensex index was down by 10.64% and 2.75% respectively.

Anoop Bhaskar, head equity at UTI MF says, “We have raised cash levels since January, as we have taken a view that we don\'t want to make any further purchases at this point of time. We have booked profit in the markets and are now sitting on cash.” He also added that, some funds like UTI Dividend Yield, UTI Opportunities are getting regular inflows, and those have not been invested resulting in higher cash levels. Interestingly, in the last three months, equity inflows for the mutual fund industry has been positive, after sustained redemption pressure from its investors.

Some of the mid-cap and small schemes like Reliance Small Cap (42.94%), L&T Mid-cap (18.4%) and Sundaram Select Mid-cap (16.76%) have increased their cash holding in February. In the month of February UTI Opportunities fund is holding cash of over 9.59% which used to 3.29% in December last year and 2.2% in September 2010.

TP Rama, MD of Sundaram MF says, “In February few of our schemes had hiked their cash levels, but in the current month we have entered the market and brought down cash levels to 5-7% levels. We invest in those stocks which don\'t have high PE ratio, so in March few stocks were trading at reasonable levels and we have bought those stocks.”

A senior fund manager from the leading fund house on condition of anonymity said, “With uncertainty in the global markets we feel that in the coming months too cash levels might stay at the same levels. Once the valuation starts looks attractive, we will be fully invested in the market.”

Source: http://www.indianexpress.com/story-print/764325/