FMC divided over allowing gold ETF trading on SEs

It is the most hassle-free route for retail investors to take an exposure to the yellow metal. But just as the gold exchange-traded funds (ETFs) were gaining in popularity, a tricky question has risen as to who should be regulating them, and whether gold ETFs should be allowed to be traded on the stock exchanges, as they are being now.

According to people familiar with the development, the consumer affairs ministry has posed this question to the law ministry, since the underlying for gold ETFs is a commodity, and should logically fall under the purview of the forward markets commission (FMC).

The law ministry had asked for FMC's inputs on the matter and the commission submitted its views past month. An official at FMC told ET that once the Forward Contract Regulation Act amendment bill is passed in Parliament, products like gold ETFs will become a part of the commodity markets, and will be regulated by FMC. But even before that, opinion within FMC is divided on whether gold ETFs should be allowed to be traded on stock exchanges. Some officials see this as an encroachment on the commodity market, while others argue that since gold ETFs are a spot instrument launched by mutual funds, there is nothing wrong in them being traded on the stock exchanges and being regulated by SEBI.

NCDEX chief economist Madan Sabnavis feels that logically since the underlying is a commodity, gold ETFs should fall under the purview of FMC. He added if such funds are launched in other commodities like soy oil there could be issues pertaining to prices, which FMC would be best placed to address.

Gold ETFs are gaining acceptance, but the products is yet to reach the popularity of mutual fund products. A total of six fund houses - Benchmark Asset Management Co, Kotak Mahindra Mutual Fund, UTI Asset Management Co, Reliance Capital Asset Management, Quantum MF and SBI Mutual Fund - at present offer gold ETFs in India.

According to data by the Association of Mutual Funds of India, assets under management (AUM) by gold ETF have risen 30% over the past one year to Rs 904 crore as on August 31, 2009.
Though gold collections under ETFs are growing, they remain minuscule when compared with India's gold imports of about 700 tonne annually.

Source: http://economictimes.indiatimes.com/Bullion/FMC-divided-over-allowing-gold-ETF-trading-on-SEs/articleshow/5095752.cms

Surge in equity fund offers in September

Nearly a dozen equity-based fund offer documents were filed with the Securities and Exchange Board of India during September, according to the regulator’s Web site.

This sudden spurt in the number of fund offers is despite the equity funds turning less attractive for distributors to sell after the scrapping of the entry load.

According to the Value Research data, three fund offer documents were filed with the regulator in July, four in August, while 11 of them have been filed in September. Of these 11, two are gold-based funds.

With the equity market on the upswing, mutual funds expect revival of g retail interest in the coming months, said the Taurus Mutual Fund Chief Executive Officer, Mr Waqar Naqvi.

Another attraction for retail investors is the Rs 10 face value for the new funds. For the existing funds, investors might have to pay the market price, which is higher, said fund managers.

The current environment is conducive for equity investments, fund managers said.

Mutual funds are dependent on market conditions when it comes to pushing their schemes, said a fund manager with a foreign fund house. Now, with markets in a bullish phase, it is easier to convince investors about equity products, he added.

Also, the previous rally of the Sensex, when it touched the 17,000 mark, was a very sharp rally and not many investors were able to ride that rally, said another fund manager.

Now, with the market momentum still in the upswing, analysts feel that investors would want to ride the next rally. The benchmark index Sensex rose by almost nine per cent in September.

While new fund houses would launch more plain vanilla funds , existing fund houses could go in for more of theme-based and more structured equity offerings, said Ms Lakshmi Iyer, Head of Products at Kotak AMC.

Even as there is a general positive feeling about the equity market, a section of fund managers feels that investors are still sceptical about investing at such high levels.

“The market is already at a peak and these levels may seem high for retail investors,” a fund manager said. Also the market has already priced in growth for the next 6-8 months, and there is not much scope for an uptrend for some time, he added.

Source: http://www.thehindubusinessline.com/2009/10/07/stories/2009100751830100.htm

MF assets dip as corporates pull out funds

Contrary to expectations that the revival in the equity market would have boosted the assets managed by mutual fund houses, nearly 58% of the 36 fund houses that have disclosed their average assets under management (AAUM) figures for September 2009, have seen a drop in assets compared with the previous month.
According to the data released by the Association of the Mutual Fund Industry (Amfi), the total industry AAUM for September 2009 stands at Rs 7,42,919 crore against Rs 7,49,915 crore as on August 2009, registering a decline of about 1% since the previous month. This is the second instance of a month-on-month decline in mutual fund assets in 2009 so far, the earlier one being in March.
According to the industry experts, the marginal decline is mainly on account of outflow of corporate funds from the debt and liquid schemes for making advance tax payments for the half year ended September. However, banks have continued to park in their idle funds with the mutual funds, though the proportion of the same appears to have dropped vis-à-vis the recent past.
According to the data released by the Reserve Bank of India, banks had an outstanding balance of Rs 1,56,573 crore with the mutual funds till September 11, 2009. This shows a rise of about 4% in the mutual fund investments by banks, compared with the investments worth Rs 1,51,136 crore by the end of August 2009.
But it is a grim situation where equity assets are concerned. Equity schemes have failed to register any significant growth despite rise in the equity markets and improving valuations of the existing schemes. With Sebi banning entry load with effect from August this year, distributors are not interested in selling mutual fund products due to inadequate commissions, said fund house officials.
In terms of fund house-wise growth, among India's larger and well-renowned fund houses, Reliance Mutual's AAUM rose marginally about 0.8% to Rs 1,18,251 crore and ICICI Prudential has reported an increase of about 3%. MFs managed by HDFC and UTI have, however, seen their AAUM shrink by about 4% and 0.5%, respectively, since August 2009.
Interestingly, it is the relatively smaller fund houses that have shown a healthy rise in their asset figures for the month. Fund houses like Taurus, Shinsei and JP Morgan have reported around 25% increase in their AAUM positions for the month ended September 2009, while Benchmark and Bharti AXA’s assets rose by 13% and 20%, respectively, this month.

Source: http://economictimes.indiatimes.com/articleshow/5082916.cms

NSE, BSE may join hands for mutual fund trading

The proposed online portal will help investors buy and sell mutual fund units and get onsolidated statements

A working group of the Association of Mutual Funds in India, or Amfi, has recommended that India’s two largest bourses, along with other firms, jointly build a transaction platform for mutual funds trading in India.
The group has suggested jointly engaging three consortia that have bid to build the platform: National Stock Exchange and National Securities Depository Ltd; Bombay Stock Exchange and Central Depository Services Ltd; and registrars Karvy Computershare Ltd and Computer Age Management Services Ltd.
“We have recommended an open architecture where strengths of all three consortia will be leveraged for the benefit of the mutual fund industry,” said Jaideep Bhattacharya, who heads the Amfi committee and is chief marketing officer of UTI Asset Management Co. Ltd.
The committee, which submitted this proposal to Amfi last week, has also suggested that mutual fund trackers Morningstar India and rating agency Icra Ltd provide the data support for this platform.
Amfi expects the platform to go live by March.
The proposed online portal will help investors buy and sell mutual fund units and get consolidated statements. With the abolition of upfront commission, few distributors are keen on servicing small investors and the transaction platform will come in handy for them.
“We have received proposals on the operationalization of the platform. A decision will be taken in a week or two. The final clearance has to come from Sebi,” said A.P. Kurian, chairman, Amfi.
According to him, the platform would provide a better reach for the industry, higher efficiency in transactions and cost control over a long term. “Similar platforms exist in developed markets like Australia and Canada. It is our effort to bring such world-class service to our investors,” he told Mint.
Officials from the bidding companies refused to comment as the proposal is yet to be finalised. The chief executive officers of four leading asset management companies confirmed the broad structure of the proposal but refused to comment as they are not familiar with the details. “A presentation is likely to be made for the members in a couple of weeks, after which a decision will be made,” one of them said.
In a parallel move, Amfi is exploring the listing of open-ended mutual fund schemes on an exchange platform.
The system has to be tweaked in such a manner that the relevant mutual fund will be the counterparty for transactions and the registrar will have to create and extinguish units for every purchase and sale, respectively, say industry experts.

Source: http://www.livemint.com/2009/09/28235001/NSE-BSE-may-join-hands-for-mu.html?h=B

L&T Fin pays Rs 45 cr for DBS Chola AMC

L&T Finance — the financial services arm of engineering major Larsen and Toubro — announced its entry into India’s mutual fund industry on Thursday, by buying DBS Cholamandalam Asset Management for Rs 45 crore.
The buyout values DBS Cholamandalam AMC — a unit of the joint venture between the Murugappa Group and Singapore’s DBS, at 1.55% of its total assets under management of Rs 2,893 crore on August 31.
Equirus Capital was advisor to L&T Finance for the deal, while Edelweiss Capital advised DBS Chola. Industry officials said the valuation is one of the lowest among the deals in the domestic mutual fund industry in the recent years.
In June, Japan’s Nomura bought a stake in LIC Mutual Fund for a valuation of about 2.5% of the fund’s assets under management. Last year, IDFC bought Standard Chartered Bank’s asset management business for a price that worked out to 5.7% of assets under management. Both these deals were considered expensive for the buyers, as a major chunk of the assets was debt at the time of acquisition.
Some in the industry believe that the deal is expensive for L&T as well, given the asset management company’s debt-laden asset mix. DBS Cholamandalam’s total assets comprises close to Rs 253 crore in equity and the rest in debt, according to data from Morningstar India, quoting AMFI figures.
The mutual fund industry has been abuzz with talks about DBS Cholamandalam AMC being on the block since 2007, though the company has officially denied it all the while. The current valuation is just a shade of what was offered to buy the AMC in 2007, said a person, who was familiar with the talks during the last stake sale attempt in 2007.
“The promoters were asking for 8% of the assets in 2007, when assets were over Rs 5,000 crore. What was offered was 6%,” said the person, on condition of anonymity. DBS Cholamandalam officials were unavailable to comment on the matter.

Source: http://economictimes.indiatimes.com/news/news-by-industry/indl-goods-/-svs/engineering/LT-Fin-pays-Rs-45-cr-for-DBS-Chola-AMC/articleshow/5058414.cms

Mutual fund agents, distributors get new Code of Conduct

Apex sectoral body AMFI has issued a fresh code of conduct for mutual fund intermediaries like agents and distributors, mandating them to disclose all commissions received from different schemes.
The revised code of conduct was issued by the Association of Mutual Funds in India (AMFI) following market regulator SEBI's circular asking the mutual fund distributors to disclose all the commissions payable to them from various schemes.
In a statement today, Sebi said all intermediaries of mutual fund companies would have to follow the code of conduct strictly.
"If any intermediary does not comply with the code of conduct, the mutual fund shall report it to AMFI and Sebi. No mutual fund shall deal with those intermediaries who do not follow code of conduct," Sebi said.
Reacting to the move, mutual fund tracking firm Value Research Online CEO Dhirendra Kumar said, "It puts onus on the Mutual Fund. Since intermediaries are not accountable to SEBI, mutual funds would have to ensure that they (intermediaries) are brought to task."
The code also requires intermediaries to adhere to guidelines issued by Sebi, highlight risk factors of each scheme, abstain from indicating or assuring returns, maintain confidentiality of all investors deals and ensure that all communications are sent on time, among others.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/Mutual-fund-agents-distributors-get-new-Code-of-Conduct/articleshow/5047949.cms

Sebi may segregate retail, institutional MF schemes

In a bid to protect the interests of retail investors, the Securities and Exchange Board of India (Sebi) is planning a clear segregation of retail and institutional schemes. Sources said Sebi might ask fund houses to create separate portfolios and net asset values (NAVs) for retail and institutional schemes.Sebi is working on the move as during the liquidity crunch of October 2008, fund managers sold the most liquid stocks in their portfolio to meet redemption pressures, leaving retail investors in a spot.
At present, although mutual funds offer both retail and institutional plans, these are separate only in the name as their portfolio and NAVs are the same. The only difference is the expense ratio, which is more for retail investors. Sources said Sebi was looking at doing away with this disparity as well.
Vineet Arora, head of products & distribution at ICICI Securities, said, “It is a welcome move. There is an obvious difference in behaviour between retail and institutional investors. Institutions tend to panic more than retail investors. Since redemption pressures are more from institutions, schemes for them will have to keep more cash, which may impact returns.”
Mutual funds charge 2-2.5 per cent from retail investors in equity schemes. The fee for institutional investors is only 0.5 per cent. The expense ratio is the percentage of a mutual fund’s net assets/corpus that goes towards meeting its expenses. The ratio covers fund management fees, marketing and selling expenses, and registrar fees. Funds with lower expenses give better returns, which is one reason why institutional schemes post better returns than retail ones. A case in point is ICICI Prudential’s Focussed Equity Fund institutional plan, which has posted 19.64 per cent returns compared with the retail plan’s figure of 18.49 per cent. There are several schemes where such a disparity exists.
Deepak Sharma, CEO, Sarthi Wealth Management Consultants, said, “The segregation is necessary after the kind of outflows witnessed in October 2008. It will ensure that retail investors are not at a disdvantage during large-scale redemptions.”
Recently, Sebi Chairman CB Bhave had expressed concern over the mutual fund industry’s over-dependence on funds from corporate houses. The Reserve Bank of India has also picked holes in the business model adopted by mutual funds. “A high dependence on corporates for funds implies a lesser role for the retail investors,” it said in its Annual Report 2008-09.
According to a Celent report, institutional investors contribute 56 per cent of the industry’s assets while retail investors account for only 37 per cent. By comparison, retail contribution in China is 70 per cent.

Source: http://www.business-standard.com/india/news/sebi-may-segregate-retail-institutional-mf-schemes/371171/

Equity funds valuation up by Rs 80,000 crore in 5 months

Encouraged by the V-shape recovery in the market value of equity portfolio, the mutual fund industry has started rewarding investors with dividends.

Data compiled by the Association of Mutual Funds in India (AMFI) suggest that equity funds portfolio valuation has risen by Rs 80,000 crore in the five months between March 31, 2009 and August 31, 2009, due to a 60 per cent recovery in the benchmark indices and over 100 per cent rise in mid-cap and small cap stocks.
Dividend payout data sourced from MutualFundsIndia.com shows 71 equity-related dividend paying schemes were back in the dividend paying list in the first half of the current financial year compared to only 4 in the financial year 2008-09. Overall, 96 equity schemes have paid dividend in the first half so far compared to 42 equity schemes in the first half of the financial year 2008-09.
Among the equity funds that paid higher dividends are Franklin India prima fund (60 per cent), Birla Sun Life basic industries fund, Reliance RSF equity fund, SBI magnum sector umbrella fund and Taurus star share fund (50 per cent each) and Principal emerging blue-chip fund, Sahara banking & financial services fund and Birla Sun Life tax relief 96 fund (40 per cent each).
Prateek Agrawal, head of equity at Bharti AXA investment managers said “It is ideal to book profits and reward investors with dividend payments, especially during the current market condition which is good. Investors usually tend to stay invested longer in equity-oriented schemes, which have this discipline.”

Further, he is expecting markets to perform reasonably well in the coming days, which could give further opportunities in terms of regular profit booking and dividend distribution.
Considering favourable market conditions so far in the current fiscal, 25 fund houses have considered dividend this time compared to only 12 same period of the previous fiscal. Among this 25 fund houses, 14 fund houses skipped dividend last year between April 2008 to September 2008.
This include Baroda Pioneer, Bharti AXA, Canara Robeco, Escorts, Fortis, ING, JP Morgan, Principal, Reliance, Religare, Sahara, Tata, Sundaram BNP Paribas and Taurus mutual fund.

Source: http://www.business-standard.com/india/news/equity-funds-valuationby-rs-80000-crore-in-5-months/370726/

MFs invest Rs 40,246 cr in blue-chip companies

Money managers handling mutual funds are playing it safe and betting on the top 10 stocks in the bourses, ensuring that their funds perform in line with the overall market. In fact, these blue-chip companies are attracting 28% of mutual fund investment in the equity market.
According to a Sunday ET analysis, out of the Rs 143,860 cr being invested in stocks by mutual funds, as much as Rs 40,246 cr has been invested in just 10 scrips — Reliance Industries, Oil & Natural Gas Corporation (ONGC), Bharti Airtel, State Bank of India (SBI), ICICI Bank, Infosys Technologies , Larsen & Toubro (L&T ), Bharat Heavy Electricals (BHEL), Tata Consultancy Services (TCS) and HDFC Bank.
Significantly, the first five have an allocation of around 18% of the total equity investment of the mutual fund industry. Also, the 10 frontline stocks have high weightage in the Sensex index. Their cumulative weightage is around 59% in the Sensex in terms of market capitalisation as on September 16.
The Sunday ET analysis was done on the basis of the data provided by Value Research India, an independent investment information provider. The figures are as on August 31.

According to Kenneth Andrade, head investments at IDFC Mutual Fund, there is a correlation between the weightage of these companies in the overall market capitalization of listed entities and the investments made by the mutual fund industry.
So far as individual holdings are concerned , Reliance Industries and ONGC attracted around 4% of the total equity investment of the mutual fund industry each. Bharti Airtel, SBI, ICICI Bank and Infosys Technologies were allocated 3% of the total amount each.

Source: http://economictimes.indiatimes.com/MFs-invest-Rs-40246-cr-in-blue-chip-cos/articleshow/5034235.cms

Regulator wants systems audit of mutual funds

Within two days of making a series of proposals to prevent Satyam-type accounting scams, the Securities and Exchange Board of India (Sebi) today said mutual funds would need to have a systems audit conducted by an independent certified information systems auditor (CISA) or its equivalent authority.

The market regulator has advised fund houses that the audit should be conducted once in two years. For financial years 2008-2009 and 2009-2010, Sebi said the systems audit should be completed by September 30, 2010.

The domestic mutual fund industry manages assets of over 7.5 lakh crore.

“The audit should be comprehensive, encompassing systems and processes inter alia related to integration of the front-office system with the back-office system, fund accounting system for calculation of net asset values, and financial accounting and reporting systems,” said Sebi.

It added the audit would also look at “unit-holder administration and servicing systems for customer service, fund flow processes, system processes for meeting regulatory requirements, prudential investment limits and access rights to systems interface.”

Nimesh Shah, chief executive officer of ICICI Prudential Mutual Fund, said, “We welcome this step and we will follow the direction as we have been given a year’s time. It is good for the industry and since the industry is in a serious business of managing people’s wealth, it is an important requirement.”

Fund CEOs that Business Standard spoke to said since new regulatory norms had come up and more players were preparing to enter the market, the systems of fund houses should be in compliance with the new regulatory norms.

Such a move would bring robustness to the industry, they said.

Sebi also asked the fund houses to place both audit and compliance reports before the trustees. These, along with the comments of the trustees, should be communicated to Sebi.

Source: http://www.business-standard.com/india/news/regulator-wants-systems-auditmutual-funds/370293/

IFAST launches Fundsupermart.com in India

The company also launched an equity funds index—FSM All-Equity Fund Index, that would act as an indicator for investors and fund managers.

Financial Services firm, iFAST Financial India on Wednesday launched Fundsupermart.com in the domestic market, an online transactional website for retail mutual fund investors.
The platform will allow customers free account opening and transactions at zero cost amongst other facilities, iFAST Financial India’s managing director, Rajesh Krishnamoorthy told reporters here.
This would also provide consolidated reports to help the customers manage their holding with ease, he said.
The company also launched an equity funds index—FSM All-Equity Fund Index (Fefi), that would act as an indicator for investors and fund managers.
The composition and structure of Fefi is based on the performance of select open-ended equity funds and currently comprises 79 equity mutual funds, Krishnanmoorthy said.

Source: http://www.livemint.com/2009/09/16165739/IFAST-launches-Fundsupermartc.html

Mutual funds ride on public sector IPOs

SBI Funds, Sundaram BNP Paribas Asset Management look to launch PSU-dedicated funds; more in pipeline

Mutual funds are trying to take advantage of the government’s disinvestment cycle beginning with the initial public offerings in NHPC Ltd and Oil India Ltd by launching dedicated funds to invest in public sector units (PSUs).

At least two fund houses have filed their offer documents with the Securities and Exchange Board of India (Sebi), the capital market regulator, and more are in the pipeline. Even fund houses that have no immediate plans to launch dedicated PSU products say they will play the theme through investment plans.

SBI Funds Management Pvt. Ltd has filed an offer document with Sebi for a fund that will invest in public sector companies. Sundaram BNP Paribas Asset Management Co. Ltd has filed a document for Sundaram BPN Paribas Select Thematic-PSU Opportunities Fund.

Both these schemes will invest at least 65% of their portfolio in equity shares of listed PSUs. Religare Mutual fund is also planning a PSU fund, said an official from the fund house, who didn’t want to be named.

India has 36 asset management companies (AMCs), with total assets under management of Rs7.49 trillion at the end of August.

Fund managers say more schemes will be launched to play the PSU theme. The fund houses will try to garner returns by investing in stocks of state-owned companies that are either about to get listed on the exchanges or have been recently listed.

Investments during listing enhance the prospects of profit booking in the long run. After NHPC and Oil India, Bharat Sanchar Nigam Ltd is one of the next big public offerings.

“We are excited about the ongoing disinvestments process by the PSUs. We would not launch any PSU-dedicated equity fund at the moment, but we will try to take advantage by changing our asset allocation strategy through some of our existing equity diversified funds,” said Sundeep Sikka, chief executive officer of Reliance Capital Asset Management Ltd. The company manages assets worth Rs1.17 trillion.

Equity-oriented PSU funds have been launched only twice in the past, and both were floated by the oldest mutual fund house in the country, UTI Asset Management Co. Pvt. Ltd. The firm in 1993 launched UTI Master Growth Fund, which invested at least 50% of its assets in PSU stocks. The fund, with assets worth Rs243.25 crore, was merged with UTI Top 100 Fund last year.

The company launched another PSU-dedicated scheme called UTI PSU Fund in 2004, with assets of Rs18.09 crore, which was merged with UTI Index Select Fund in April 2007.

Traditionally, mutual funds have been the biggest buyers of PSU stocks during disinvestment. Many mutual fund experts believe PSU stocks can be the best bet for investors in the long run. This is because the government’s capital-raising strategy has changed over time. Until about two years ago, the government was considered conservative and hence, a majority of PSU shares used to be held by it.

As the markets evolved, the government is now more liberal towards disinvestment of its stakes in PSUs to raise capital. This change in tack would provide more clarity about the government’s moves, unlock the value of PSU companies and help fan positive sentiment among investors towards PSU shares. Fund managers are betting on this sentiment by launching new equity-related PSU funds.

“PSU stocks are generally available at a discount as compared with other companies. So, there is clearly an opportunity for mutual fund investments,” said Dhirendra Kumar, CEO, Value Research India Pvt. Ltd, a New-Delhi based mutual fund tracking firm.

“The businesses of PSUs are very focused and in the long run, we are very optimistic about such companies. Though the performance of PSU companies is very cyclical, in a span of three-five years, PSU stocks should outperform the markets,” he added.

According to a recent report by Prime Database, a New-Delhi-based primary market investment tracking firm, the scope for PSU IPOs is huge.

“The divestment process can begin with a bang and continue to create new milestones. With all these offerings, the shape and size of the Indian capital market will change for ever, and for good,” said Prithvi Haldea, chairman and managing director of Prime Database.

Still, there are concerns. There are 80 listed PSU firms on the Bombay Stock Exchange. In terms of year-to-date gains, the benchmark Sensex has outperformed PSU stocks. While the Sensex has risen 72.87% during the calendar year, the PSU index has managed a gain of 66.45%.

Some fund managers are sceptical about the launch of dedicated PSU equity funds, saying a limited universe of asset allocation among PSU firms could crimp returns.

“We will not launch any thematic PSU fund at the moment, since the opportunity in the space is limited. Even with more PSU companies getting listed, we will rather prefer to watch how the market evolves. But we may invest in PSU companies through some of our existing schemes,” said Jaideep Bhattacharya, chief marketing officer, UTI Asset Management, which manages Rs73,926 crore of assets.

Another risk, according to N. Sethuram, chief investment officer of Shinsei Asset Management (India) Pvt. Ltd, is that PSUs are not an all-weather investment. “Themes need to be useful across time bands. We need to see how far they are useful,” he said. “PSUs tend to perform in line with the government. The performance is subject to the government of the day and policy risks.”

Source: http://www.livemint.com/2009/09/16214007/Mutual-funds-ride-on-public-se.html

Debt funds boost MF assets to Rs.7.57 tn in Aug

The Indian mutual fund industry’s assets under management touched a new peak of Rs.7.57 trillion at the end of August, thought the growth was moderate at 5 percent over the previous month. The month under review saw net inflows of Rs.327 billion across categories with debt funds witnessing Rs.383 billion of net inflows. All other key categories saw net outflows. Liquid funds saw the highest net outflows among mutual fund categories, to the tune of Rs.52 billion in August. This was driven by lower returns which led investors to shift to ultra short term debt funds.
On the returns front, equity funds out-performed on the back of a strong performance from midcap and small cap funds while the long term debt funds saw negative returns due to rising yields, according to CRISIL FundServices.
“Ultra short term debt funds saw strong inflows in August, with banks parking their surplus funds in these schemes. At the same time, the new rule of no entry loads seems to have initially dulled the inflows into equity funds even though fund performances were good for the month,” said Krishnan Sitaraman, Director – CRISIL FundServices.
CRISIL’s analysis of over 300 equity oriented schemes shows that over 250 schemes gave better 1-month returns than the S&P CNX Nifty in August. Midcap and small cap funds posted better returns than large cap funds and benchmark indices across all periods analysed (1 month, 3 months and 1 year).
“The realty, consumer durables and technology sectors were significant out-performers in the month which saw benchmark equity indices ending flat reflecting in the S&P CNX Nifty rising 0.6 percent,” Sitaraman added.
Mutual funds’ average AUM has now risen by over 85 percent since the liquidity crisis in the last quarter 2008 when industry average AUM had dropped to around Rs.4 trillion in November 2008.

Source: http://economictimes.indiatimes.com/articleshow/5014648.cms

SREI Infra gets Sebi nod to launch mutual fund biz

Non-banking finance company SREI Infrastructure today said it has got in-principle approval from the Securities & Exchange Board of India (Sebi) to launch its mutual fund business in the country.

The company would be incorporating two wholly-owned subsidiaries for carrying out the asset management business.
"Pursuant to an in-principle approval received by the company from the Sebi for setting up a mutual fund, the board has decided to incorporate two wholly owned subsidiary companies for carrying out the activities of asset or fund management and trusteeship services," SREI Infrastructure said in a filing to the Bombay Stock Exchange.
Besides, the board has approved the resignation of Somabrata Mandal as the Director of the Company with effect from September 12.
Earlier this month, Axis Asset Management Company (Axis AMC), a wholly owned subsidiary of Axis Bank Ltd, had received the final regulatory approval from the Sebi to launch its mutual fund business in the country.
Shares of SREI Infra were trading at Rs 75.30, up 4.37 per cent in late afternoon trade on the BSE.

Source: http://www.business-standard.com/india/news/srei-infra-gets-sebi-nod-to-launch-mutual-fund-biz/73388/on

India stk fund inflows drop as entry fee ban bites

Net collections by Indian stock funds turned negative for the first time in four months in August, a month after the market regulator banned entry fees by mutual funds, limiting their ability to pay distributors.
The Securities and Exchange Board of India in July directed mutual funds to abolish front-end or entry fees from August 1, a move aimed at cutting costs for investors and to discourage aggressive selling.
However, the step has irked distributors, who bring more than 90 percent of the business to money managers and have threatened to stop selling mutual funds, given the potential loss in fees.
"Under the new norms, distributors are no longer likely to get higher commission from AMCs and, therefore, mutual fund business, especially sale of equity funds, has become an unattractive proposition," said Chintamani Dagade, a senior research analyst with Morningstar.
He said equity markets trading at higher levels would have also held investors back from investing.
Indian stock funds recorded a 1.18 billion rupees net outflow in August, the sharpest monthly decline in 2009, after three straight months of robust flows on back of a strong rebound in domestic shares.
Inflows into existing funds dropped by more than a third to its lowest since April.

Source: http://in.reuters.com/article/domesticNews/idINBOM44046320090911

Govt to adopt common qualifying exam for financial advisors

The government is preparing to implement the suggestion made last week by an expert panel to introduce a common qualifying exam for financial advisors of all kinds ranging from tele-marketers of car and personal loans to sellers of mutual funds and insurance policies.

The proposed exam is aimed at testing their knowledge of not only what they sell, but also of all other financial products chasing the same customer. Officials from the finance ministry, financial regulators and market players will on Wednesday deliberate on the consultation paper titled ‘minimum common standards for financial advisors and financial education’ prepared by the D Swarup committee.

The idea is to crystallise the form of the proposed self-regulator for financial advisors, Financial Well-Being Board of India—which will set the benchmarks for the eligibility and standards for them, said a government official. The panel had recommended that the existing examinations in mutual funds, insurance and others should continue as different modules within the overall scope of the proposed eligibility test.

This is part of the government’s plans to prevent financial advisors from acting merely as the agents of one insurance company or one mutual fund house for which they work, while their job is to give customers insights into the relative benefits of competing products as well.

Under the law, financial planners are supposed to serve the end customer and not their employers since these middlemen get their pay either directly from the end consumer or from his investments without his knowledge. In practice, financial advisors act as the marketing agents of producers of financial productsmutual funds, insurance, loans etc—although the customer pays for his services. The finance ministry wants to put an end to this practice.

Finance ministry officials said the proposed self regulator may be asked to set the educational benchmark for all financial advisors including insurance agents, mutual fund sellers and retail loan pushers.

“Now many financial planners know only about the products they push and are ignorant about the competing products in the market. The proposed self-regulator may fix the benchmark for the examination that all of them have to pass, but sectoral regulators like Sebi or IRDA will be responsible for implementing the standards and holding the exams,” said an official, who asked not to be named. The D Swarup panel had also suggested that all upfront commissions now paid to a financial advisor from the investment made by a customer be removed.

Now, to be an insurance, one needs to pass 12th standard if he lives in a place with a population of 5,000 people or more. Passing 10th standard would suffice for those staying in other places.

To get the licence to sell, one needs to pass a pre-recruitment exam in life or general insurance conducted by the Insurance Institute of India and undergo 100 hours of training at the insurance firm for which he would work. Besides, aspiring insurance agents should also have the requisite knowledge to solicit and procure insurance business and be capable of providing the necessary service to the policyholders.

Source: http://economictimes.indiatimes.com/News/Economy/Govt-to-adopt-common-qualifying-exam-for-financial-advisors/articleshow/4989182.cms

MFs need to improve on transparency, disclosure

The recent move by the Securities and Exchange Board of India (Sebi) banning entry load and capping exit load, among other things, has turned the spotlight on the possible improvement in rights of mutual fund (MF) holders in the country. Sure, we already have regulations in place.

But according to industry observers the Sebi move points to improvement in investor rights. “The rights protection of mutual fund holders have been always been on top of Sebi agenda. It has also moved a great deal in the last few years towards improvement in this direction,’’ says Devendra Nevgi, an independent investment consultant.

Here are the rights that are available to an MF holder as per Sebi Regulations on MFs:
A) An investor is entitled to receive statements of accounts in 6 weeks from the date of request for unit certificates.

B) He also has a right to receive information about investment policies, objectives, financial position and general affairs of the scheme.

C) He is eligible to receive dividend within 42 days of declaration, and the proceeds within 10 days from the date of redemption or repurchase.

D) Trustees are bound disclose to unit holders any information that could adversely impact investments.

E) With prior Sebi approval, 75% of the unit holders can terminate the AMC of the fund.

F) They can also pass a resolution to wind-up the scheme.

G) An investor can also send complaints to Sebi, who will take up the matter with the concerned MFs and follow them up till the issue is solved.

Does that mean that everything is hunky dory with MFs? To a certain extent, say experts. “No fund house will take an investor for granted, as nobody wants bad publicity. Also, fund houses know that the Sebi is extremely serious about investor protection,’’ says an MF advisor who didn’t want to be quoted.

Nevgi says: “If an investor writes to Sebi about not getting dividend or redemption proceeds on time, the regulator takes it very seriously. Even mutual funds treat those matters seriously. So those kind of complaints are very uncommon in the industry,’’ he says. However, he feels there is scope for more improvement. “When it comes to quantitative rights like receiving dividend or redemption cheque on time, things are very much in place. However, when it comes to transparency or frequency of portfolio disclosure, things can still improve.’’

The view is shared by many others. “Transparency is a big issue. There are lot of problems like schemes with strange and funny names. Also there are lot of schemes which are repackaged where the investment objective and investment portfolio are not close to each other,’’ says Nevgi. “Complex schemes are the main issue. Name of the scheme or investment objective can be interpreted the way the manager wants. This can confuse investors. They would realise they invested in a wrong scheme only when things go wrong,’’ says an expert.

Another area which most experts feel could improve is frequency of portfolio disclosure. They point out that since fund houses have the choice of making the disclosure of portfolio twice a year, many fund houses are lacking in this aspect. “Some funds don’t even bother to send detailed portfolio. Investors also should be blamed as they don’t take it seriously. In fact, they should demand portfolio since that is the only way they will come to know how their money is invested,’’ says the MF expert.

Source: http://timesofindia.indiatimes.com/news/business/india-business/MFs-need-to-improve-on-transparency-disclosure/articleshow/4992707.cms

Axis AMC, two others in race for DBS Chola assets

Negotiations are at an advanced stage and the deal could be closed soon; price likely to be around Rs80 crore

Axis Asset Management Co. Ltd, Indiabulls Financial Services Ltd and L&T Finance Ltd have emerged as the top contenders for the assets of DBS Cholamandalam Asset Management Ltd.
Edelweiss Capital Ltd is investment banker for the deal.
A DBS Cholamandalam executive, who spoke on condition of anonymity, said negotiations are at an advanced stage and the deal could be closed soon.
The price is likely to be around Rs80 crore, said an investment banker, who did not want to be identified.
Axis Asset Management is the new kid on the block in the mutual fund business; it has been promoted by Axis Bank Ltd. The bank received the Securities and Exchange Board of India’s (Sebi) nod for entering the mutual fund business last week. L&T Finance has not yet moved the capital markets regulator seeking its nod for starting an asset management company (AMC), while Indiabulls is awaiting an approval.
Rajiv Anand, managing director and chief executive of Axis AMC, said: “We are happy to look at acquisitions if the deal comes at the right price and matches our investment philosophy, but we would not like to comment on any specific deal.”
N. Sivaraman, director at L&T Finance, said: “Asset management business looks interesting to us. We have not yet applied to Sebi. There are multiple options available for inorganic growth.”
“An acquisition can help us get into the business fast. But till such time we take a final decision, it continues to be a speculation,” he added.
Indiabulls Financial Services couldn’t be reached for comment. Spokespersons of DBS as well as the Murugappa Group declined comment on “market speculation”.
DBS Cholamandalam Asset Management is a subsidiary of Cholamandalam DBS Finance Ltd, a joint venture between Chennai-based Murugappa Group and DBS Bank Ltd of Singapore, with each holding 37.5% and the rest being held by the public.
In August, it had Rs2,893.16 crore worth of assets under management (AUM). Of this, equity assets account for Rs252.93 crore under 11 schemes and the rest is debt. The volume of AUM plays a key role in valuing an AMC. At Rs80 crore, the cost of DBS Cholamandalam works out to be around 3% of its assets.
Typically, larger the equity asset base of the fund house, the higher its valuation. Debt funds receive lower valuation as the commission from managing such funds is lower than that on equity funds.
“A 3% valuation for DBS Cholamandalam would be on the higher side as most of the assets of the fund house are under debt and liquid schemes that fetch lower income compared with equity schemes,” said a senior official at a large bank-controlled AMC, who did not want to be identified.
DBS Cholamandalam has 78 employees, including 12 fund managers and 40 back-office employees. It is present at 22 locations across India and has at least 118,000 customer accounts. It posted a Rs38 crore loss for the year ended March.
Axis Asset Management, which is yet to launch its first fund, has 50 employees, including four fund managers and 10 back-office employees.
“Integration of employees is an issue that has to be looked into carefully. These kinds of acquisitions often result in retrenchment (of staff) which is avoidable,” said the DBS Cholamandalam official.
“We are aiming to have 100 employees and 8-10 schemes in our portfolio by March 2010. We have targeted a market share of 3% in terms of AUM in the next four-five years, which would place us among the top 10 fund houses in the country,” said Anand of Axis AMC.
India’s Rs7.49 trillion by assets mutual funds industry has 36 players, with Reliance Capital Asset Management Ltd topping the list with an average AUM of Rs1.17 trillion in August. It is followed by HDFC Asset Management Co. Ltd with average assets of Rs93,874.19 crore and ICICI Prudential Asset Management Co. Ltd with Rs77,966.86 crore.
Though the valuation of DBS Cholamandalam is seen as expensive by some fund managers, some deals in the past have been closed at higher valuations. For instance, Infrastructure Development Finance Co. Ltd (IDFC) in March 2008 took over Standard Chartered Bank’s asset management business in India for $205 million (nearly Rs995 crore today), valuing the firm at 5.67% of its AUM. IDFC retained the StanChart AMC’s staff.
In December 2007, Eton Park Capital Management Lp acquired a 5% stake in Reliance Capital Asset Management for Rs501 crore, valuing the AMC at 13% of its AUM.
In November, Religare AEGON Asset Management Co. Ltd (now known as Religare Asset Management Co. Ltd as Aegon exit the joint venture) bought Lotus India AMC, a joint venture between Fullerton Fund Management Group and London-based Sabre Capital Worldwide for around Rs110 crore, which valued Lotus AMC at about 2% of its AUM of Rs5,500 crore. About 90% of Lotus AMC’s assets were debt.

Source: http://www.livemint.com/2009/09/09230153/Axis-AMC-two-others-in-race-f.html?h=B

IDBI, Union Bank to foray into asset management biz in 6 mths

In a bid to diversify their operations, two state-run banks -- Union Bank and IDBI Bank -- are planning to venture into asset management space and have approached the market regulator SEBI for approval.
While IDBI Bank had filed application for licence in January this year, Union Bank of India had submitted its papers with the regulator in February.
All these proposals are at the advance stage of clearance, official sources said.
During the course of the year these banks are expected to get licence and thereafter they can start asset management, sources added.
Meanwhile, the country's third largest private sector lender, Axis Bank has already got the regulator's approval to start asset management business.
The Union Bank of India has set up an asset management firm with KBC Group of Belgium. The joint venture, in which Union Bank owns 51 per cent stake expects to start operations during the current fiscal.
Another public sector lender IDBI Bank has board approval to set up the asset management company either as a wholly-owned subsidiary or as a joint venture.
Currently, there are five mutual funds either fully or partly owned by Indian banks, along with foreign partners.
These include Baroda Pioneer Mutual Fund, Canara Robeco Mutual Fund, ICICI Prudential Mutual Fund, Principal Mutual Fund and SBI Mutual Fund.
The combined average AUM of the 30 fund houses stood at Rs 5,38,736.43 crore at the end of July as monthly AUM figures of many fund houses were not available.
Last month, the total average AUM of 35 fund houses had surged nearly five per cent to Rs 6,70,936.61 crore, according to the data available on the website of the Association of Mutual Fund of India (AMFI).
Fund houses which saw an increase in their average AUM in July include Canara Robeco MF, Deutsche MF, IDFC MF, Religare MF and LIC MF.
Some of the fund houses like HDFC MF witnessed additions of Rs 5,168.20 crore to its assets under management (AAUM), while ICICI Prudential MF's AUMs grew by Rs 3,159.09 crore in July.

Source: http://economictimes.indiatimes.com/Personal-Finance/Mutual-Funds/IDBI-Union-Bank-to-foray-into-asset-management-biz-in-6-mths/articleshow/4977898.cms

Axis AMC gets SEBI nod to launch mutual fund business

Axis Asset Management Company Limited (Axis AMC), a wholly owned subsidiary of Axis Bank Ltd, today announced that it has received the final regulatory approval from the Securities & Exchange Board of India (SEBI) to launch its mutual fund business in the country.
Axis AMC now aims to launch its first set of products in October 2009, a company statement said here.
Axis AMC will shortly be filing for both equity and debt products. These offerings should be available by October / November of this year.
"We have received SEBIs approval. The Asset Management industry in India is amongst the fastest growing financial services businesses from across the globe. With a growth rate of over 30 per cent CAGR during the last 6 years, the mutual fund business presents an interesting opportunity, Axis AMC's MD & CEO, Rajiv Anand said in a statement here.
It is a fairly crowded investment market but we think that there is great merit in delivering solutions rather than just launch products. It is this investor centric approach built on customer oriented communication, long term relationships and enduring wealth creation that will seek to differentiate Axis Mutual Fund. We will aim to be amongst the top 10 fund houses in the country within the next 4-5 years, Anand said.

Source: http://economictimes.indiatimes.com/Personal-Finance/Mutual-Funds/Axis-AMC-gets-SEBI-nod-to-launch-mutual-fund-business/articleshow/4978453.cms