IDFC Premier Equity Fund: Less vulnerable to fluctuations

IDFC Premier Equity Fund is designed to invest in upcoming, but promising businesses available at cheap valuations, and hold on to these businesses until they reap desired returns. The experiment has been successful so far, and IDFC Premier Equity has emerged as one of the top performing mutual fund schemes in the mid- and smallcap category of equity schemes. While the scheme is an open-ended equity fund, i.e. open for subscriptions throughout the year, it has a unique philosophy to limit fresh inflows.

Thus, while an investor can always take the systematic investment plan (SIP) route to invest in the scheme throughout the year, inflows through a lumpsum investment have been restricted. Since inception, IDFC Premier Equity has been opened for lump-sum investments only thrice so far - June 2006, October 2007 and January 2010 for a brief while only. It has now been opened for lumpsum investments once again in April 2011, but again for a brief period only.

PERFORMANCE

Though launched at the end of 2005, IDFC Premier Equity has exhibited its potential only after Kenneth Andrade took over the management of the fund in early 2007. Strictly adhering to its philosophy of "buying cheap but good, and selling high", this fund has zipped past performance of many other well-established schemes in the category by distinctive margins. It zoomed past the 63% gains by its benchmark index - BSE 500 - by an overwhelming 111% in 2007. Then again, it succeeded in restricting its fall to about 53% against BSE 500's 58% in the meltdown year of 2008.The recovery era of 2009 saw the fund at its best once again, delivering 102% against BSE 500's 90% while last year despite extreme volatility on the Indian bourses, the investors of IDFC Premier Equity reaped a handsome 32% gain as against BSE 500's 16%. Thus, so far, since the time of its launch, this scheme has enriched its investors by more than 226% absolute gains against 112% absolute returns by BSE 500 during the same period. This implies that every Rs 1,000 invested in IDFC Premier Equity in September 2005 has grown to about Rs 3,263 today.

PORTFOLIO

It is rare to find extremely popular and wellestablished scrips in the portfolio of IDFC Premier Equity. One can, however, definitely hunt for companies currently available cheap, but which have good growth potential and revenue earning visibility. IDFC Premier Equity was one of the very few schemes to pick up the then nonperforming stocks like Bata India in 2008. Similarly, it was one of the few schemes to foresee the embedded potential in the initial public offers (IPO) like Page Industries. Such stocks like Bata and Page have turned out as multi-baggers for the fund. Some of its other astute and timely picks include Motherson Sumi, Glaxosmithkline Consumer Healthcare , Bluedart Express, IRB Infrastructure, Coromandel International, Shriram Transport Finance and Asian Paints. Each of these scrips was picked at extremely cheap valuations way back in 2008-09 and has reaped remarkable yields for the fund so far.

The fund manager appears to be on a hunting spree once again as the fund's latest portfolio is loaded with a good number of new picks. These include Globus Spirits, Tilaknagar Industries, United Spirits, Whirlpool, Bajaj Electrical, Kaveri Seed, Gujarat State Petronet, P&G Hygiene & Healthcare, Nilkamal, PTC, Arvind and Cox & Kings. A high exposure to an otherwise defensive FMCG sector is clearly evident and this, once again, signals the fund manager's investment approach of sailing against the tide. Despite Banking and Financials being the most sought after sectors currently by most mutual fund schemes, IDFC Premier Equity prefers to stick to its reflexes and has opted for FMCG instead. Will the dice roll in favour of the fund manager once again - as it has been in the past - will be worth a watch!

OUR VIEW

Notwithstanding the fact that IDFC Premier Equity falls under the cadre of mid- and small-cap categories of schemes, its astute equity picks make the fund less vulnerable to this presumed high risk category. Investors with little risk potential can consider IDFC Premier Equity for investments. Investors may do well to consider a target investment period of 3-5 years as the companies sought by this scheme may take time to reap returns.

Source: http://economictimes.indiatimes.com/features/investors-guide/idfc-premier-equity-fund-less-vulnerable-to-fluctuations/articleshow/8000549.cms

Five large MFs control half of the mutual fund industry assets

The number of fund houses are increasing each year in the fast growing Indian economy but when it comes about the size, the top five players control over half of the country's mutual fund business.

An analysis of average assets under management (AUM) by over 40 fund houses shows that the top five layers-- Reliance MF, HDFC MF, ICICI MF , UTI MF and Birla Sun Life -- together control more than half of the total assets managed by the MF industry in India.

The Indian mutual fund industry is valued worth Rs 7 lakh crore as per the latest data available with the industry association Association of Mutual Funds in India (AMFI).

And putting together, these top five fund houses own assets worth nearly Rs 4 lakh crore, which is about 55 per cent of the average AUM of all the fund houses.

A number of new players are entering the field each year. Only recently, capital market regulator SEBI gave its green signal to financial houses like Union Bank of India , India Infoline and Indiabulls to operate MF business.

Total assets under management (AUM) of 41 fund houses in the country rose to Rs 7,00,538 crore at the end of March, according to AMFI data.

At the end of last month, the AUM of the largest MF in India, Reliance MF stood at Rs 1,01,576.60 crore. This was followed by HDFC MF whose average assets was Rs 86,282.24 and ICICI Prudential MF with an AUM of Rs 73,466.10 crore.

Besides, UTI MF's assets stood at Rs 67,188.82 crore and Birla Sun Life at Rs 63,696.2 crore in end-March, 2011.

The total AUM of the remaining 36 fund houses currently stands at about Rs 3.09 lakh crore.

The MF industry, which is facing withdrawal pressure, saw their asset base dwindle over the last year. The average AUMs of the industry declined by over 6 per cent in March-end, from Rs 7.47 lakh crore at the end of March 31, 2010.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/analysis/five-large-mfs-control-half-of-the-mutual-fund-industry-assets/articleshow/7980798.cms

Inflows into ELSS funds down by almost 60%

Lack of clarity on tax implications under the impending new rules and poor returns kept retail investors away from tax-saver mutual fund schemes last fiscal, when inflows plunged 58%.

Net inflows into equity-linked saving schemes, which provide tax benefits to investors, dropped to 606 crore last fiscal from 1,437 crore a year earlier. At the peak of the bull market in 2007, these funds raised assets worth 5,499 crore in the "tax-season months" between October 2007 and March 2008.

"Investors are shifting from lump-sum investment to the systematic investment plan. This trend has hit inflows into tax-savers in a big way," said Karan Datta, national sales head, Axis Asset Management . Another reason for the low investment flow into tax-savers, according to Mr Datta, is the inadequate support from fund distributors. "The number of IFAs (independent financial advisors) selling mutual funds has come down significantly over the past year."

According to fund industry sources, investors are also put off by the average performance of tax-savers over the past year - while the 30-share Sensex gained about 8%, ELSS, as a fund category, generated just over 6% returns.

Tax-savers, with an asset base of over 25,500 crore, form 4% of the overall fund industry asset base of 5.92 lakh crore.

"Traditional investment products like PPF, national savings certificates, traditional insurance schemes and retail bond issuances were the major recipients of retail money this fiscal year," said K Venkitesh, national head - distribution, Geojit BNP Paribas Financial Services . " ELSS did not evince much interest as investors are unclear about the fate of tax-saving products under the direct tax code."

As per the direct tax code, investors will not be able to get tax benefits if they invest in ELSS or ULIPs. The DTC shall be effective from April 1, 2012.

Tax-saver bond issuances by IDFC, IFCI, L&T and PFC also ate into the ELSS pie. Retail tax saving bonds, with coupon rates ranging between 9% and 9.5%, have raised over 5,000 crore from retail investors over the past six months, wealth managers said.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/inflows-into-elss-funds-down-by-almost-60/articleshow/7976978.cms

Canara Robeco MF Announces Change in Key Personnel

Canara Robeco Mutual Fund has announced that Mr. Soumendra Nath Lahiri has been appointed as Head - Equities of Canara Robeco Asset Management Limited. He is aged 44 and holds B.E, PGDM as his educational qualification. He has an overall experience of 21 years. In his previous assignment he has been Chief Investment Officer - PMS Equity Investment with Emkay Investment Managers Limited (January 2011 to March 2011), Chief Investment Officer - Advisory Services with Fortuna Capital (May 2008 to December 2010), Co-Head - Equities with DSP Merill Lynch Investment Managers Private Limited (June 2004 to March 2008) and Head - Equities with Dolat Capital Market Private Limited. (September 1995 to May 2004).

Change in Fund Management Responsibilities

Soumendra Nath Lahiri will manage Canara Robeco Emerging Equities, Canara Robeco Multicap, Canara Robeco Nifty Index, Canara Robeco Equity Diversified, Canara Robeco F.O.R.C.E Fund, Canara Robeco Infrastructure, Canara Robeco Equity Tax Saver, Canara Robeco Large Cap + Fund, Canara Robeco Balance and Canara Capital Protection Oriented Fund - Series 1 - 36 Months (Plan A).

Ritesh Jain will manage Canara Robeco Monthly Income Plan.

Akhil Mittal & Suman Prasad will manage Canara Robeco Dynamic Bond Fund, Canara Robeco Treasury Advantage Fund, Canara Robeco Gilt, Canara Robeco Short Term Fund, Canara Robeco Liquid and Canara Robeco Floating Rate. The changes will be effective immediately.

Source: http://www.adityabirlamoney.com/news/468567/10/22,24/Mutual-Funds-Reports/Canara-Robeco-MF-Announces-Change-in-Key-Personnel

Kotak Group Expands U.S. Presence with Launch of its First U.S. Mutual Fund

Kotak Group, one of India's leading diversified financial services providers, continues to build its U.S. presence with the launch of the first U.S. mutual fund from an India-based firm. The ALPS Kotak India Growth Fund seeks to achieve long-term capital appreciation by investing in large-cap, mid-cap and small-cap Indian companies with high growth potential, and is intended to provide U.S. retail and institutional investors with an opportunity to gain broad exposure across all key sectors of India's large and growing economy. ALPS Advisors Inc., will serve as the Fund's investment advisor while Kotak Mahindra (UK) Limited, a subsidiary of the Group's flagship Kotak Mahindra Bank, will act as sub-advisor and will manage the Fund's investment portfolio.

"The launch of the ALPS Kotak India Growth Fund is a natural next step in the expansion of Kotak Group's business and presence in North America," said Ravilochan Pola, CEO and President of Kotak Mahindra Inc., the Group's North American arm based in New York. "Launching our first U.S. fund leverages the Groups strong asset management and India equities research capabilities to provide U.S. investors with an opportunity to potentially benefit from the insights and perspective provided by an Indian financial institution with vast fund management experience, deep roots and nationwide presence in India."

Kotak Mahindra (UK) Ltd.'s Nitin Jain will serve as principal Portfolio Manager for the Fund and will oversee a team of fund managers and analysts seeking to identify the most attractive growth companies among India's top listed companies representing all levels of market capitalization and across all sectors. "The India growth story is a multi-faceted one, driven by a number of key, sometimes inter-related themes and trends, including demographic led growth in consumption, expansion of the financial sector, massive investment in infrastructure, continued growth in India's role as an outsourcing center and the cyclical impact of commodities," explained Mr. Jain. "The Fund's investment strategy reflects this dynamic macroeconomic environment and our flexible multi-cap, cross-sector approach is intended to maximize returns and lower volatility on behalf of our investors."

The ALPS Kotak India Growth Fund is distributed by ALPS Distributors, Inc. and is currently available through Oppenheimer & Co., Commonwealth, Credit Suisse, Fidelity, JP Morgan, Pershing, Schwab and TD Ameritrade.

About The Kotak Group

The Kotak Group is one of India's largest diversified financial services providers with significant operations in commercial banking, retail banking, asset management, stock broking, insurance and investment banking. With offices in London, New York, Santa Clara, Singapore, Mauritius and Dubai, the Kotak Group has nearly $11 billion in assets under management, including $2 billion in assets from non-Indian investors. Kotak manages a broad range of onshore and offshore funds across all assets classes. The Group employs more than 20,000 people and serves more than 8 million customers in India and around the world.

Incorporated in the United Kingdom and authorized and regulated by the Financial Services Authority in the United Kingdom, Kotak Mahindra (UK) Limited (KMUK) is a member of the London Stock Exchange and is registered with the Securities Exchange Board of India as a Foreign Institutional Investor. KMUK has branch offices in Singapore and Dubai that are regulated by the Monetary Authority of Singapore and the Dubai Financial Services Authority respectively. KMUK is also registered as an investment adviser with the Securities and Exchange Commission in the U.S.

About ALPS

Headquartered in Denver with offices in Boston, New York, and Seattle, ALPS is a twenty five year old financial ser vices firm focused on asset services and asset gathering. Now with more than 300 employees, nearly 200 clients, and an executive team that's been in place for over 15 years, ALPS continues to actively promote all of its various business segments, from asset servicing through ALPS Fund Services, Inc. to asset gathering through ALPS Distributors, Inc. and ALPS Advisors, Inc. As of December 31, 2010, the firm manages more than $2.7 billion in assets and provides servicing to more than $288 billion in client assets. For more information about ALPS and the services available, visit www.alpsinc.com, and for additional information about ALPS products, visit www.alpsfunds.com.

Source: http://www.moneylife.in/prnews/kotak-group-expands-us-presence-with-launch-of-its-first-us-mutual-fund/201104111015PR_NEWS_USPR_____NY80640.html

For the passive investor

Taking the ETF or index fund route makes sense. But there are costs involved for opening a demat account and trading through a broker.

Thirty nine-year-old Sanjay Jadhav has been contemplating investing in the equity markets for sometime now. But he is unsure how to go about it. One, he lacks the expertise for stock-picking. Two, he does not want to track stocks prices or mutual fund net asset values on a regular basis. For someone like Jadhav, Hemant Rustagi, CEO, Wiseinvest Advisors, advises exchange-traded funds (ETFs) and index mutual funds. Both track the broader benchmark indices and deliver returns that closely match their performance. The fund manager has a limited role to ensure that the selected stocks work as efficiently as the index these mirror.

Among the two, ETFs stand a better chance of beating the index because of their lower tracking errors. Over the last one year, index ETFs have outperformed both the Sensex and Nifty. Index ETFs have given an average of 11 per cent as compared to the Sensex’s 9.81 per cent returns. During the same time, ETFs tracking Nifty returned around 10.39 per cent while S&P CNX Nifty’s returns were pegged at 10.13 per cent. Also, equity largecap funds gave 9.9 per cent returns.

“Investors, who would like to diversify within this asset class itself, could look at sectors funds or ETFs. “However, these will always carry the risks associated with the sector,” warns Rustagi.

Those with long-term outlook could include gold ETFs to balance their portfolio, says Hiren Dhakan, associate fund manager, Bonanza Portfolio. “Once you are already invested in equity, investing five-seven per cent of your portfolio across a different asset class could be looked at,” adds Dhakan. Gold ETFs have given over 20 per cent returns during the last year.

For those planning to diversify globally, Dhakan’s advice is to stay away from markets that are similar to the Indian markets. So, one could avoid other emerging markets indices such as the Hang Seng Benchmark ETF, and opt for the ETFs tracking other developed markets like the Nasdaq. Of course, one must not forget the exchange rate risk involved in investing in global funds.

COSTS INVOLVED
Both index funds and ETFs have lower costs as compared to active mutual funds, since these do not spend on research and other operating costs. While an active mutual fund will charge 2.25 per cent annually, management fees for an index fund is 1.5 per cent and for an ETF will be one per cent.

However, unlike index funds, which can be bought and sold from fund companies, ETFs are traded on exchanges through a broker. So, one needs a demat account to buy and sell ETFs.

It means one would be paying brokerage and demat maintenance charges, in addition to the ETF management fees. In case of selling unit of the index fund before a year, there would be an exit load of one per cent.

TAX ON TRANSACTION
Both ETFs and index funds get the same tax treatment as the other equity mutual funds. So, while the Securities Transaction Tax applies to both, there is no long-term capital gains tax on these. The short-term capital gains tax is 15 per cent.

Source: http://www.business-standard.com/india/news/forpassive-investor/431871/

Use simple, less risky products to woo investors: SEBI to MF cos

Capital market regulator SEBI today asked mutual fund companies to come out with simple and less riskier products to enhance retail participation, even as it considered increasing investor awareness about mutual fund investment as the biggest challenge for the industry.

"We are trying that the Mutual Fund companies should launch easier, cheaper and less riskier products to transact ... to involve more people in Mutual Fund segment," SEBI Executive Director KN Vaidyanathan said while delivering a talk on 'Mutual Funds: Opportunities and Challenges'.

The total assets size of Mutual Fund sector in the country is pegged at over Rs 6 lakh crore, constituting 40 per cent of retail investments, while the rest is with institutions and large investors.

Noting that there was enough headroom for Mutual Fund segment to grow, Vaidyanathan said creating investor awareness about the mutual fund sector has been the biggest challenge before the regulator.

"Not many people trust MF segment... it is the biggest challenge before us," he said.

Vaidyanathan said banking sector gets 55 to 60 per cent of total savings in the country, the insurance industry attracts 30-35 per cent, while Mutual Funds segment gets only 10-15 per cent of savings.

According to the SEBI Executive Director, about 3-4 lakh crore was annually pumped into banking, followed by Rs 1.5 lakh crore in insurance (excluding ULIP) and just Rs 25,000 crore was invested in to MF sector.

While dwelling upon steps taken by the SEBI to make MF as investor-centric industry, Vaidyanathan said that abolition of entry load on MF products had yielded Rs 2,500 crore to the investors in just 20 months.

"Amount of entry load saved is Rs 2,500 crore in just 18-20 months...this is possibly the biggest benefit investors have got," he said.

SEBI abolished entry load on MF products varied between 2-5 per cent in August 2009, much to the discomfort of the distributors.

Later when asked if SEBI was framing any guidelines for regulating the wealth management business after the much publicised Rs 450 crore-Gurgaon Citi Bank fraud, he said, "the work is in progress", but refused to put a timeframe in this regard.

When asked about allowing foreign investment into MF industry, he said, "rules are being worked out and that should not be too far away."

Source: http://articles.economictimes.indiatimes.com/2011-04-09/news/29400681_1_entry-load-mf-sector-kn-vaidyanathan

We expect a downgrade in EPS of Sensex basket - UTI AMC

Mr Harsha Upadhyaya is Executive Vice-President and Fund Manager, UTI Asset Management Company. He has been managing funds at UTI AMC since 2006. He manages an AUM in excess of Rs 4,000 crore across five funds. In an interview to Business Line, he gives insights into various issues related to the equity market.

Where is the stock market headed?

The current rally is purely driven by FII flows. Fundamentally no economic indicator has changed. Crude is at $124 a barrel and unlikely to sustain at these levels for long.

Reallocation of Japanese assets across emerging markets could be one of the reasons. In the short term, markets are expected to be range bound with some downside if liquidity flow reverses. The worst case scenario for GDP growth is 7 per cent.

What about valuation?

We expect a 5 to 6 per cent downgrade in the EPS of the Sensex basket that is currently at 1,274. The key issue is whether the money into India will keep coming despite all the negatives. However, the second half will be much better than the first half.

If monsoon is normal, inflation will cool off. Interest rate scenario will change. But the market would remain range bound for the next couple of quarters.

What do you expect from the FY11 earnings season?

We expect a 11 to 12 per cent for Q4 FY11 over the corresponding quarter of last year, i.e. Q4 FY10.

What is your take on the capex plans of corporates in the coming fiscal?

We expect capex to pick up in the second half of this fiscal.

There is always a hesitation to undertake capex during a hardening interest rate regime but that should change in the second half.

What has been the incremental AUM addition to your schemes?

Take the case of UTI opportunities fund that has a long-term focus. We have seen 15 per cent incremental AUM additions and its AUM is now Rs 1,600 crore.

The fund has been consistently outperforming its benchmark — the BSE 100 — since 2007 and it is this consistency and acceptability that has led to the inflows.

What is the frequency with which you churn and what are your cash levels as a percentage of AUM?

We are comfortable with an average cash level of 4 to 5 per cent. We prefer to churn rather than take cash calls. Our frequency of churn including derivatives is 0.9 (less than one) and 0.6 if derivatives are excluded.

Do you write options?

We never did options. Given the kind of investor base and profile that we have, we have restricted ourselves.

We do arbitrage in cash and futures and would continue to do that and would not like enter into derivative transactions that most of our investors do not understand.

What sectors are you looking at going forward?

Our current portfolio has 20 per cent exposure to FMCG, 15-16 per cent in banking and energy distribution and 7 to 10 per cent in cement, IT, auto and auto ancillary. We are underweight on banking and have brought down our exposure from 24 to 16 per cent because of the margin pressures that banks are expected to face.

We usually follow a 70:30 allocation pattern, 70 per cent in large caps and 30 per cent in good quality mid caps.

Source: http://www.thehindubusinessline.com/markets/stock-markets/article1688885.ece