Top AMCs rake in more profits despite hard times.

India's top asset management companies (AMCs) have continued to remain profitable, no matter whether mutual fund investors made money or not in the tough market conditions. Rather, top players have posted growth in their profitability during financial year 2011-12.

Reliance Mutual Fund, despite losing its top slot to HDFC MF during the year, continued to remain the most profitable asset manager in the industry, with Rs 276 crore as net profit in FY12, a growth of 5.6 per cent against Rs 261 crore in the previous financial year. HDFC MF, the country’s largest fund house, grew faster to Rs 269 crore, growth of 11 per cent compared with Rs 242 crore in FY11.

ICICI AMC, the third largest fund house, grew the fastest in terms of profitability, at 22.5 per cent to Rs 88 crore against Rs 72 crore earlier. However, Birla Sun Life AMC’s profit declined a big 30 per cent in FY12. The numbers of UTI AMC were not available.

Sundeep Sikka, chief executive officer (CEO), Reliance AMC, says, “The biggest factor which helped us increase our profits is our focus on retail customers from a long-term perspective. Though acquisition of retail is expensive, in the long term it becomes profitable. It’s an annuity business and our commitment to investors is for the long term.”

The top five control 54 per cent of the industry’s assets (there were 44 fund houses managing an average assets under management (AUM) of Rs 6,64,792 crore as on March 31). These players reported rise in profits in a year that saw erosion of a little over five per cent of the industry’s AUM, while equity AUM dipped 6.7 per cent.

According to Dhirendra Kumar, CEO of fund tracker firm Value Research, “The mutual fund business is a low capital one. Once a fund house reaches the threshold, it keeps making profits. And, the more the equity assets, it will kick up the profits of AMCs.”

Source: http://www.business-standard.com/india/news/top-amcs-rake-in-more-profits-despite-hard-times/474964/

Indian MF industry has immense growth potential: Jimmy A Patel, CEO, Quantum Mutual Fund

The Indian mutual fund industry is currently going through a rough patch. Not only are the industry's assets under stress, but given the current macro-economic concerns, the survival of many of the relatively small and new fund houses is under doubt. With retail investors becoming more skeptical about the MF industry, the ET Intelligence Group attempts to address their concerns by asking industry veterans to give a fresh perspective on investment prospects, and the growth drivers and factors that are likely to impact mutual funds in India . Edited excerpts: 

Jimmy A Patel, CEO, Quantum Mutual Fund

How would you describe the current state of affairs in the Indian MF industry?
The Indian mutual fund industry has immense growth potential, and if aided well by technological advancements and increased awareness, MFs can be a major contributor to the overall Indian economy. However, it appears, the industry has not learnt from its past mistakes. The industry still seems to be operating on an asset gathering mandate, and not an asset managing one; the focus of the industry still seems to be driven by business agendas and not on building a community that is truly concerned about its investors; market share and "piece-of-the-wallet" concerns still precede issues like investor safety and delivery of risk-adjusted returns. The fund industry is still in a learning stage, though unfortunately, it seems to forget its earlier lessons all too soon

The MF industry, a few years ago, had set tall targets for itself. How far are we from achieving those targets?
Targets are necessary. It's not just about achieving them, but more about moving in that direction. Rather than meeting a number, the industry should focus on becoming absolutely investor-friendly - right from the time an investor starts understanding about mutual funds through to the entire experience of helping him create wealth. Better regulations, advanced technology and conscientious managements will help in moving towards this aim.

Why should retail investors invest in funds when the future of many fund houses itself is in doldrums?
When you choose to invest with a fund house, you should ascertain its background well so that you can be sure of the future of your investments. In times such as now, retail investors should choose to get convinced about the investment philosophy of a fund house before investing in it, rather than get convinced by brilliant marketing gimmicks or aggressive distribution strategies. Investors must take care to choose their fund well.

Should the retail investor (today) go by the fund house or the scheme performance's, especially if the scheme belongs to a smaller fund house?
If a fund is like a prospective life partner, a fund house is like its family. If you have solid family background backing your chosen partner, it reduces the scope of unwanted future uncertainties. However, the size of fund or a fund house has little to do with its performance. When you look at performance, consider consistent track records rather than spikes in returns, especially in the short term. A consistent fund will probably provide you with greater comfort in times of volatility as compared to a one-year star performer.

What do you think is the future of relatively smaller and newer fund houses?
The skepticism about the future of smaller fund houses is sheer speculation. Smaller fund houses will continue to do well in the coming years just like their larger peers. The Indian mutual fund industry has a bright future for transparent and ethical fund houses that are truly concerned about investors and focus on investor security and on delivering risk-adjusted returns, irrespective of their size or their years of existence.


Do you think the industry will consolidate in the coming years?
While the law of economics suggests consolidation, which would reduce costs greatly, different fund houses have different needs and objectives which might not sync favorably with such an approach. For all you know, several fund houses may not even go for consolidation; the moment they see their business becoming unviable they may just exit the business. This may be the case for foreign fund houses operating in India. Domestic fund houses again will not consolidate their business; they will try to survive the bad times... They will wait for a gain in their valuations before finding a partnership deal with some other player wanting to start an AMC business in the country.

In current times, when survival of the fittest holds water, what steps have you taken to ensure your existence? What are your strategies to sustain this business?
We are a different fund house. Being the only direct-to-investor fund house, we are constantly exploring new avenues to reach out to our investors and spread what we call "the Quantum way of investing". Here again, the online medium would be our strength as we look to reach out to the base of over 100 million online Indians and bring them a better way of creating wealth over the long term. Some of our best ideas are a simple implementation of our investors' feedback.

Do you think it is time the industry explored newer investment avenues - beyond equities, fixed income and gold?
Investors today are saturated with schemes. Investors are also paranoid about opaque markets, the disappointing corruption reports and repetitive scams. It thus, is the responsibility of the industry to collaborate to re-instill faith in investors, not by increasing the number of investor awareness programmes, or by launching new ad campaigns to promote this message, but by simply stepping away from the wallet-share game and retrospect on how they could best be asset managers working for the benefit of the end investor.

What is your advice to retail investors with respect to investing in mutual funds and equity markets?
The purpose of investing in MFs is to have a professionally managed portfolio of products that suit your requirement. An investor has a few basic requirements: one, create wealth over the long term for which you need an equity scheme; two, save tax for which you would need an Equity-Linked Savings Scheme; three, need to have some cash in reserve in case of an emergency for which you will need to look at a debt/liquid scheme; and four, need to counter equity exposure for which you could opt for a Gold ETF. These are the basic products that an investor needs to have, and not the hordes of schemes that clutter his portfolio.

Source: http://economictimes.indiatimes.com/features/investors-guide/indian-mf-industry-has-immense-growth-potential-jimmy-a-patel-ceo-quantum-mutual-fund/articleshow/13348012.cms?curpg=2

Fear grips the market again; what should you tell your investors?

Concerns over a possible Greek exit from the euro-zone and a lacklustre Indian economy have given Indian markets a double whammy. The Finance Minister’s announcement that austerity measures are needed has only added to the anxiety. In these tough times, what should you tell your investors? Read on to find out what top industry officials are saying.

Rajiv Anand, MD & CEO of Axis Mutual Fund, recommends that investors should invest through equity diversified funds and increase allocation to SIPs.

If you don’t think that India is going to grow at 7%, then you should buy fixed income. If you think that India is poised for a 7% growth then there is huge amount of value in stocks currently. If you want to build a high quality portfolio for the long term, then I think the market is providing you that opportunity now. If investors stay invested in diversified equity funds then they can’t go wrong.

Every year there is a different event. Events come and go. Today we are talking about Greece and in a year we’ll talk about some other event. Yes, there is no denying that there are issues in Europe but investors are probably not seeing that commodity prices have come down globally and are expected to fall even further. This is positive for India. Over a period of time that will percolate into the Indian economy.

We have heard distributors complaining that SIPs have not performed when there was a secular market upturn from 2003 to 2008. Now when the markets are falling people are complaining that they are not getting any returns. SIP is about disciplined investing and you need to eliminate emotions from investments. I would urge that investors should increase allocation in SIPs. Have faith and patience and you’ll be rewarded.

Ravi Gopalakrishnan, Executive Director, CIO–Equity, Pramerica Mutual Fund, suggests staying with large caps.

Volatility will continue for some more time. Apart from the global uncertainty we have our own problems as well. So it’s a double whammy. The European situation needs to stabilise, at least momentarily. Strong actions particularly on the reforms side are needed.

SIPs should always continue. Equity will remain to be the best asset class over the medium to long term. Markets only allow opportunities during these uncertain times. I would advise investors to look at diversified large cap funds because any recovery in the market will reflect in large cap stocks first. If there is any further uncertainty large caps are better placed to tackle volatility.

Debashish Mallick, MD & CEO of IDBI Mutual Fund, says that investors can look at index funds if they face difficulty choosing stocks.

Investors with risk appetite can invest in equities now through diversified funds. I would suggest steering clear from sector or thematic funds. SIPs should continue. Lump sum investment can also be done over next three months or more. At this juncture index funds also look good because the broader market has gone down. If you are unable to choose which stock to invest in, index funds are ideal.

Source: http://www.cafemutual.com/News/InnerNews.aspx?srno=1379&MainType=New&NewsType=Industry&id=21

Should investors abandon equities for good?

Things are really bleak. Most investors haven't made any money in the past five years from the market. That is why it is very difficult to convince them about the long-term prospects of equity at the moment," says the head of a large mutual fund in a rare moment of candour.

"If they are willing to listen, I can still try to convince them that the current trend is an exception, not the norm. Probably we are witnessing one of the darkest periods in history," he adds.

There are many market participants - investment consultants, mutual fund officials and distributors, financial planners and so on - who share his bleak view.

The trouble is the situation is partly their creation. Not long ago, the same people were telling investors that long term means three years in the market. And they would also add in the same breath that stocks would beat all other asset classes in the long term.

Investors interpreted the message like this: if you invest in stocks for three years, you never lose money. In fact, you make a pot of gold.

However, things have changed. Investors are not so naive anymore. They have seen that their investments haven't returned anything in the last few years. As for the experts, they can't offer the same lines anymore to the harried investors who have lost or at best made single-digit returns from the market in the "long term".

Worse, some of these investors are not even ready to listen to any amount of reasoning. They have mostly made up their mind that they are better off with conventional investment avenues like bank deposits, bonds and so on. They have already parted company with the stock market or are in the process of doing so.

The trend was in the making for a long time, confirmed by outflows from mutual fund schemes and the lower number of systematic investment plans (SIPs) in the recent past.

"Yes, we face similar questions. But I try to tell them that they are speaking with the benefit of hindsight. But we didn't know at that time that the stock market would behave this way or the bank FDs and bonds would give this kind of returns," says Suresh Sadagopan, founder, Ladder7 Financial Advisories.

"Despite so many point-to-point comparisons doing the rounds about underperformance of equity, long-term historical data proves that equity beats all other asset classes. So the theory that you should take the stock market route to meet your long-term goals still stands," he adds.

How long is 'long term'?

That brings us to the million dollar question that investors are asking the so-called experts: How long is "long term".

"I believe five years can be counted as long term, even in the current scenario. I try to make them understand that they shouldn't panic at the current situation because this is highly unusual. Typically, we see the Indian stock market moving cyclically every three years," says Hemant Rustagi, CEO, Wiseinvest, a wealth management firm.

Source: http://economictimes.indiatimes.com/personal-finance/savings-centre/analysis/should-investors-abandon-equities-for-good/articleshow/13178968.cms

ICICI Prudential Mutual Fund Introduced SIP Insure

In a bid to provide both investment and life insurance cover for investors, ICICI Prudential mutual fund has introduced SIP Insure.

SIP insure is an add-on, optional feature available across 16 equity schemes of ICICI Prudential mutual fund. The cost of the insurance will be entirely borne by the Asset Management Company. No additional documents or medical tests will be required. However, investors only have to fill-up some details.

Feature will have uniform insurance cover. In the first year, the insurance cover will be ten times the monthly SIP installment. In the second year it will be fifty times the monthly SIP installment. From the third year it will be hundred times the monthly SIP installment. However, it will be subject to maximum insurance coverage of Rs 20 lakh a investor.

The life Cover will continue even if SIP stops. Minimum entry age is 18 years while maximum entry age is 46 years. The cover will continue up to the age of 55 years.

Source: http://www.policymantra.com/blog/news/3633-icici-prudential-mutual-fund-introduced-sip-insure.html