Fitch harmonises Indian fund rating scales with SEBI

Fitch Ratings has changed its Indian mutual fund rating scales in line with the guidelines issued by the Securities and Exchange Board of India (SEBI) dated 15 June 2011.

Prior to this change, Fitch had two different rating scales in keeping with its global practices. First, a money market fund (MMF) rating scale (with an 'mmf' suffix) - applicable to funds whose objectives are capital preservation and investor liquidity. Secondly, a bond fund rating scale, where credit and volatility ratings are assigned together to reflect credit and market risks.

Fitch's fund rating methodologies (for money market and bond funds) are consistent with SEBI-recommended scales and definitions. As such, SEBI guidelines clearly suggest two distinct rating scales for long-term and short- term funds and the proposed rating definition focuses on "safety regarding timely receipt of payments from the investments". Fitch's global methodologies have always focused on both credit and market risks for the evaluation of mutual funds and its new rating scales and methodologies for money market and bond funds mirror SEBI's categorisation.

Fitch will therefore rate short-term funds whose market and liquidity risks are considered extremely low by the agency, notably Indian liquid funds, on the short-term scale. As such, the outstanding Indian MMF rating of 'Fitch AAA(mmf)(ind)', applicable to liquid funds, will be converted to 'Fitch A1+mfs(ind)' under the new scale. Short-term funds with marginally higher risk profiles - in terms of liquidity, maturity and credit quality - will be rated 'Fitch A1mfs(ind)'. As such, the ratings of short-term funds will be capped at 'Fitch A1mfs(ind)' unless the asset management company manages liquidity and market risks at a level comparable to a liquid fund.

Short-term funds whose risk parameters do not allow capital preservation and/or investor liquidity under stressed market conditions, as per Fitch's criteria, will be rated on the long-term scale. Consistent with Fitch's MMF rating criteria, as detailed in the global MMF and national criteria, short-term fund ratings will continue to evaluate the impact of credit, liquidity and market risks on the ability of such funds to preserve capital and provide liquidity to investors.

Fitch will continue to rate long-term bond funds on the long-term scale. Consistent with its bond fund rating criteria, the ratings will continue to reflect the current and prospective credit quality of the underlying assets, their maturity and concentration. For such funds, Fitch will continue to simultaneously provide a volatility rating, mainly reflecting portfolio duration and liquidity. The agency believes that long-term bond funds can exhibit different sensitivities to market risks for the same underlying credit quality, and therefore an additional rating is needed to provide a full picture of a fund's risk profile.

Fitch's fund ratings will continue to include an assessment of the fund manager's capabilities and the fund's operational set up.

Fitch will shortly review its fund ratings and subsequently publish a report on the evaluation of Indian fixed income funds.

Source: http://economictimes.indiatimes.com/news/international-business/fitch-harmonises-indian-fund-rating-scales-with-sebi/articleshow/10302676.cms

Axis MF Introduces Micro SIP Under Axis Gold Fund

Axis Mutual Fund has announced the introduction of Micro SIP under Axis Gold Fund which will be available during the New Fund Offer (NFO) period. The new fund offer period will close on October 14, 2011.
 

Axis MF has also introduced Easy SMS Facility (Mobile Transaction Facility) for all open-ended schemes of Axis Mutual Fund (except for Axis Gold ETF), with effect from October 17, 2011.

Source: http://www.valueresearchonline.com/story/h2_storyView.asp?str=18206

Reliance MF Decides to Modify Features Under its Schemes

Change in Exit Load clause for Reliance SIP Insure:

There will be an exit load of 2%, if the accumulated units acquired or allotted under Reliance SIP Insure are redeemed or switched out before the maturity of committed SIP Insure tenure or before completion of 55 years of age whichever is earlier as opted in the respective scheme either by the SIP Insure unit holder or by the nominee, as the case may be. 

Change in Exit Load for Reliance Floating Rate Fund - Short Term Plan

The exit load charge will be 0.25%, if unit are redeemed within 3 months from the date of allotment and Nil, thereafter.

Introduction of Reliance Smart Step Feature:

Reliance Small Cap Fund, Reliance Index Fund - Nifty Plan and Reliance Index Fund-Sensex Plan shall be added in the list of Eligible Transferee (Equity) Schemes in Reliance Smart Step feature which is available in all the open ended debt schemes (except Interval Funds).

Introduction of Reliance Salary Advantage facility in the following schemes:

 Reliance Salary Advantage is being introduced in Reliance Money Manager Fund, Reliance Short Term Fund, Reliance Gilt Securities Fund, Reliance Liquidity Fund, Reliance Liquid Fund - Cash Plan, Reliance Index Fund - Nifty Plan, Reliance Index Fund - Sensex Plan, Reliance Small Cap Fund, Reliance Infrastructure Fund, Reliance Arbitrage Advantage Fund, Reliance Natural Resources Fund and Reliance Long Term Equity Fund.

The above changes will be effective from 10 October 2011.

Source: http://www.adityabirlamoney.com/MktNews/NewsDetails.aspx?srno=509465&secid=10&subsecid=22,24

Canara Robeco MF declares dividend under two schemes

Canara Robeco Mutual Fund has declared dividend under dividend options of Canara Robeco Equity Diversified Fund and Canara Robeco Balance Fund

The quantum of dividends will be Rs 1.00 per unit under Canara Robeco Equity Diversified Fund and Rs 1.50 per unit Canara Robeco Balance Fund as on record date. The record date for the dividend pay out has been fixed as October 14, 2011. The schemes recorded NAV of Rs 23.0300 per unit and Rs 50.4000 per unit, respectively as on October 7, 2011

Source: http://www.rsec.co.in/market-and-news/mutual-funds/mutual-fund-news-details/canara-robeco-mf-declares-dividend-under-two-schemes-/153677

Niche marketing helps funds beat downturn

When the going gets tough, the tough gets going. Post the ban on entry load, many mutual fund players have realigned their business strategy to focus on their ‘niche’ segments. It was in August 2009 that the market regulator imposed a ban on the entry load and ever since the sales of equity schemes–the bread and butter of mutual fund industry— have been falling. Not to mention the poor equity markets giving little headroom to launch new fund offering (NFO). However two years later, the ‘niche’ positioning that many fund houses had adopted to market their products is helping them survive the downturn.

Some of the fund houses such as Goldman Sachs (formerly known as Benchmark MF), Motilal Oswal and more recently launched India Infoline MF are now focusing on ‘passively’ managed products. Passively managed funds could be exchange traded funds, index funds or quant funds which as the name suggests are passively managed as against ‘active’ funds which usually has a fund manager actively picking stocks for his funds. Focusing on passive funds is less capital-intensive for a fund house, and often the preferred way for a new player to start operations in the country.

Edelweiss MF, for instance, wants to capture the share of big ticket size investors like high net worth individuals (HNIs) and mid net worth individual (MNIs) by concentrating on quant-based funds.

Vikaas M Sachdeva, CEO of Edelweiss Mutual Fund, says, “We have now branded ourselves as a quant fund house. In fact, our MIP(Monthly Income Plan) is also a quant MIP on the equity part. We have two kinds of funds, long-only funds and an absolute return fund. As the latter is a fairly new concept, we are targeting private banks, top 100 distributors in each territory and engaging them in a dialogue.” He says the fund house is not targeting large assets but expects at least 500 new converts every year, who will eventually sell their funds.

For big five fund houses such as Reliance MF, HDFC MF, Birla Sun Life MF and SBI MF, the focus is clearly to go the ‘retail’ way by pushing for systematic investment plan (SIPs) in the semi-urban as well as rural areas. “It's not only about equity assets, but about building quality assets,” says Sundeep Sikka, CEO of Reliance MF. “We are happy to get more number of small-ticket size investors through SIP compared to lump-sum investments. We are trying to build-up a long-term, sustainable business model.”

Industry players feels that top fund houses can grow their business by targeting investors from tier- II and III cities as they have the financial strength to make huge investments and acquire new customers. Manoj Kumar Vijai, partner, KPMG India, says, “Definitely these are the main focus of the big fund houses as there is immense growth potential in the semi-urban and rural areas. Fund houses are also getting positive response from smaller markets as there is a huge untapped potential for financial investments there.” Most top fund houses promote products through small distributors and even give them proper training in selling products. SIP investors invest in small amounts in a scheme (some fund houses even allow subscription of as less as R100 per month) on a regular basis which in turn brings a lot of discipline in financial investing.

According to market participants, the ban on entry load precipitated the promotion of SIPs by fund houses, which were seeking regular inflows into their funds. However, as against the pre-entry load regime, when commissions worth 2.25-2.5% of investments were paid by investors, now the fund houses themselves are paying for it.

If larger fund houses are spending money on expanding their retail base, other fund players such as IDBI Mutual and Peerless Mutual Fund are expanding their equity product bouquet even in this downturn. Debasish Mallick, MD and COO of IDBI Mutual Fund, says, “Currently we have only two equity index funds. In order to get more retail clients we want to increase our product portfolio and we are also planning to enter active funds in the months to come.”

For Akshay Gupta, CEO and MD at Peerless Fund Management, launching equity products at this juncture also helps build a ‘track record’. “It is also a good time to invest into equity funds. Investors who enter equity funds at this time could see their NAV rise when the equity market conditions improve” he says.

Source: http://www.financialexpress.com/news/niche-marketing-helps-funds-beat-downturn/857845/0

SEBI rule forces PMS to shift assets to mutual fund

Parag Parikh Financial Advisory Services (PPFAS) has proposed to channel assets from its portfolio management services (PMS) business to set up a mutual fund. The structural change is perhaps the first of its kind since the market regulator proposed a five-fold increase in the minimum investment level for the PMS segment.

The Securities and Exchange Board of India’s (Sebi) proposal to increase the minimum threshold from Rs5 lakh to Rs25 lakh added to a series of other existing operational issues, resulting in a decision to switch to a mutual fund structure to manage its clients’ money, said a top executive of the firm.

Under the PMS structure, an investment manager takes a client’s money and manages this corpus for him in return for a fee.
 

Sebi suggested that this service should only be made available to sophisticated investors because of the high risk involved, and has accordingly proposed an increase in minimum threshold.

Although in value-terms the bulk of PPFAS’s assets comes in from clients who are above the Rs25 lakh threshold, the maximum number of clients are at the Rs5 lakh threshold, said a company official prompting a shift to the mutual fund model.

On the Sebi website, the status of an application by PPFAS reads thus: the company is ‘to revert with further information.’
 

Rajeev Thakkar, CRO of the firm, said the company had received an in-principle approval in June 2011.

“We hope to be ready to start operations in 4-5 months pending final regulatory approvals,” he said.

PPFAS currently has assets under management (AUM) of Rs350 crore. This would make it larger than 19 of the 42 players in the mutual fund industry in terms of equity AUM.

The shift was also because handling client numbers which had grown from 25-30 in 2003 to 560 was becoming a problem operationally, said Thakkar.

“There would be documentation requirements at multiple levels. One would need to do the paperwork for a separate bank account, another set for the custodian, yet other documents for brokerage and a separate PMS paperwork,” he said.

The asset management company will be set up with an initial capital of Rs15 crore.

PPFAS had a net profit of Rs5.8 crore in 2011, according to its latest annual report.

Source: http://www.dnaindia.com/money/report_sebi-rule-forces-pms-to-shift-assets-to-mutual-fund_1595830