Sahara fund for just Rs 10/day

In a bid to take mutual fund investments to the masses, Sahara Mutual Fund is proposing to launch a scheme that will accept investments on a daily basis, and for as little as Rs 10. The fund house, part of the Sahara India group, has filed draft prospectus with the regulator for Sahara Daily Fund, an open-ended debt scheme that will invest in high- quality debt and money market instruments.
Interestingly, Sahara MF's new scheme is being planned exactly two years before Sahara India Financial Corp (SIFCL) is scheduled to stop accepting public deposits, including daily deposits, under directive from the Reserve Bank of India (RBI). In a release dated June 17, 2008, RBI had directed SIFCL not to accept any new deposit with maturity after June 30, 2011. It has also been asked to stop accepting instalments of existing deposit accounts effect the same date.
Speaking to TOI, Naresh Kumar Garg, CEO, Sahara MF, said that the fund house plans to leverage technology and Sahara's wide network of representatives to take its Daily Fund scheme even to daily wage earners and small shop owners. "There is an entire population that was not thought of by the conventional mutual fund houses. This fund has the potential to help in financial inclusion that the government is talking about for so long,'' Garg said. "Our fund is compatible with the concepts of micro savings-micro investments,'' the Sahara MF CEO added.
The fund house plans to use Sahara's representatives across India to collect on a daily basis a small amount from even daily wage earners, shopkeepers and others willing to invest in the scheme. Using technology, the investor will be given a printed acknowledgement slip on the spot and allotments of units will be done as per Sebi rules. "The plan is to put mutual fund investments on a different platform,'' Garg said.
According to the draft offer document for Sahara MF's Daily Fund, the scheme will invest in debt and debt-related assets, including money market instruments. The minimum investment is Rs 10 and further investments in multiples of Re 1.
Some see Sahara MF's moves as taking systematic investments to a new `Nano' level. At present, micro SIPs in the range of Rs 50-100 exist in the fund industry, but those mostly come through the cooperative or union route, thus bringing down the cost of monthly collection. Industry players feel that Sahara MF's scheme could provide a low-risk investment solution for the fund's target audience as it will invest mainly in debt and debt related instruments, in the long run which can give yields between 3.5% to 10%.
Relating to its directive from the central bank, in June last year, other than asking SIFCL to stop taking public deposits from June 2011, it was also asked to repay all the public deposits as and when they mature and bring down its deposit liabilities to zero on or before June 30, 2015. "SIFCL shall not treat non-payment of instalments under any running daily deposit or other recurring deposit schemes by depositors after June 30, 2011, as a default by depositor and SIFCL shall be liable to pay the agreed rate of interest on the amounts actually held by it for the entire term of the deposit as if there was no default,'' RBI had noted in the release.

Source: http://timesofindia.indiatimes.com/Business/Sahara-fund-for-just-Rs-10day/articleshow/4492978.cms

MFs completely missed April rally

While foreign institutional investors were buying Indian shares hand over fist --- like they never have in the past 18 months ---- local mutual funds were consumed by a debt wish.
A DNA analysis of fund behaviour in April 2009 shows that local fundmen's continued caution may have robbed the small investor of a chance to ride the best monthly stock rally in 10 years.
The Sensex rose 17.4% or 1,694 points in April, and investor wealth by Rs 5,00,903 crore or Rs 1.42 crore per trading second.
The market capitalisation of Bombay Stock Exchange rose from Rs 30,86,000 crore to Rs 35,87,000 crore during the "cruellest" month.
Estimates by Icra, the credit rating agency, say diversified equity schemes whose primary mandate is to invest in equities were holding on to cash positions of up to 15%, a majority of the purchases in April was debt paper --- worth Rs 26,450 crore. But this could be liquid funds money being rolled over from March. There was an outflow of Rs 37,000 crore from liquid schemes in the month, according to the Association of Mutual Funds of India data.
Nevertheless, it is the highest monthly investments into debt ever by mutual funds. It tops the Rs 18,421 crore worth debt purchased by funds in January this year.
Gross purchases of debt by funds stood at Rs 45,991.90 crore in April --- they sold Rs 19,541.70 crore worth of paper, giving a net buy of Rs 26,450 crore.
In sharp contrast, net inflows from mutual funds into equity was a paltry Rs 38.6 crore, according to Securities and Exchange Board of India data.
While funds bought stocks worth Rs 12,137.80 crore, they sold almost an equal amount ---Rs 120,98.90 crore.
Globally, risk aversion has reduced significantly, and emerging markets including India have been receiving copious flows from FIIs.
FIIs have invested Rs 6,500 crore in the equity markets and Rs 2,490 crore into debt in April. In all, they plonked in more than Rs 10,000 crore in the last two months.
Though Indian funds seemed to have joined the party initially, they decided to pull out as the momentum was too fast for their comfort. In March, mutual funds had turned net buyers, reeling in equities worth
Rs 1,477 crore, which was then a six-month record.
That's after being net sellers in January and February, a time when FIIs also sold big-time.
Cash levels in diversified mutual funds are above 15%, according to Icra data.
The upshot: 90% of diversified equity schemes have trailed the market performance in April, according to a report by Reuters, with returns to investor severely affected.
"Equity fund managers were unwilling to commit their money due to political uncertainty around the polls. But now there would be a lot of pressure to put money into the market," said a fund manager, requesting anonymity.
Interestingly, mutual funds seem to be dipping toes when the rally is looking "overbought" according to some marketmen.
On Monday, FIIs bought shares worth Rs 1491.10 crore, while mutual funds bought equities worth Rs 378.80 crore. That was a big buy after a long hiatus.
However, they seem to have reverted to mean, as it where, on Tuesday. Provisional data for the day show domestic institutions sold equities worth Rs 129.85 crore, while FIIs bought shares worth Rs 508.51 crore.
"FIIs who have put in money are ones who have received fresh inflows whereas that is not the case for mutual funds. Fixed-income is receiving a greater portion of the liquidity as compared to equity offerings," said Rajan Krishnan, CEO of Baroda Pioneer AMC, which saw a 66% increase in its assets under management, driven largely by fresh inflows to its liquid fund.
"There is a large amount of liquidity in the hands of the corporates and other institutions which traditionally invest into the fixed income side of the market. On the other hand, retail investors and high net-worth individuals who drive the equity inflows are adopting a wait and watch approach. Hence the flows to debt," said Sanjay Sinha, CEO of DBS Cholamandalam Asset Management.
The mutual fund AUM for April has gone up by Rs 58,000 crore. Reliance was the top gainer adding Rs 7,400 crore to its kitty, while HDFC and UTI saw their AUM rise by Rs 5,900 crore and Rs 5,700 crore, respectively.
The overall gain in AUM is 11.76%.The combined AUM stands at Rs 5,55,000 crore.

Source: http://www.dnaindia.com/report.asp?newsid=1253328

Mutual Funds: Variable loads can wait

Market regulator SEBI’s proposal to let mutual fund investors decide what they want to pay their agents failed to impress the participants at the ETIG Mutual Funds Round Table held last week. Bringing back rebating would be a more effective solution if SEBI wants to provide greater pricing power to investors, said MF house chief executives and distributors including Fidelity’s Ashu Suyash, Reliance ‘s Sundeep Sikka and HDFC Bank ‘s Abhay Aima among others.
Speaking to an audience of editors and reporters from ET and ET NOW, they said introducing a variable load system would only hurt the already feeble MF penetration in the country and open up a Pandora’s Box of consumer complaints.
Today, a small investor has to pay roughly 2.25% to get entry into an MF scheme, while large investments of typically Rs 1 crore upwards do not attract any loads. The regulator has proposed to abolish this and replace it with a system popular in more developed markets where the investors, big or small, control the fee. SEBI has proposed two options.
One, the investor, in consultation with his broker, can mention the amount of commission he is willing to pay on the application . Alternately, the investor can write two cheques – one for his investment amount and the other for the commission he would want to pay his agent.
While agreeing that Indian investors deserve greater pricing power, Vijay Venkatram of Wealth Forum, said: “If made operational in its current form, it will lead to a plethora of customer complaints and further confusion.”
Fidelity’s Ashu Suyash felt that merely “lifting” international practices could be detrimental to penetration of MF industry in the country. “When fund houses are working to attract investors from Guwahati to Nariman Point, our focus should be to come up with an improvement within the current regulations,” she said.
Ms Suyash pointed out that SEBI has already introduced no-load funds last year when it said that if an investor goes to a fund house directly without the assistance of a distributor, his entry fees would be waived.
The market regulator feels the current MF fee structure gives investor no control over the fees that the agent gets, especially if he is not satisfied with the latter’s advice.
Reliance MF’s Sundeep Sikka, however, argued that variable load structure will not necessarily lead to customer satisfaction as “valuing and quantifying advice” will always be a challenge. Panelists agreed that the problem could be solved if rebating is brought out from its closet and made transparent.
HDFC Bank’s Abhay Aima said reintroduction of “transparent rebating” will ensure better pricing, adding that the Indian MF buyer should not be underestimated . “If he can see through the bania at a neighbourhood kirana store, he can also figure out the banias in the MF industry,” he said much to the glee of the audience. SEBI is yet to announce whether it will go ahead with its proposal.
Bajaj Capital’s Rajiv Deep Bajaj said the move may be good in the long-term , but India is not yet ready for it. “It will empower investors but this may not be the right time for the move,” he said.
In 2002, Association of Mutual Funds in India (Amfi) and SEBI had banned rebating in MFs as most MF companies and distributors would pay back part of their MF fees to investors in a bid to increase their investors. Thus, an investor who paid 2.5% of his investment as entry fees of a MF scheme would get back about 1% of his investment either in cheque or cash.
The ban was brought in because the authorities thought this process was not fully transparent. Besides, there was a mounting fear that the distributor unduly influenced investor’s decision by offering a higher rebate, when his only job is to give advice. It’s the fund house that should be giving him (broker) the remuneration.

TO SUM UP
WHAT?
Commission should be determined mutually between the investor and the broker/banker, depending on the service provided by the latter
WHY?
Current fee structure is linked to the size of the investment and has no correlation to the service provided by the distributor. SEBI also hopes to make the commision process more transparent
HOW?
Two proposals. First involves a separate section in the application form where the investor can tick how much he wants to pay. Or the investor issues a seperate cheque towards commission
WHEN?
Currently SEBI is studying the suggestions made by fund houses, distributors and investors. It is silent on whether it plans to go ahead with the move.

Source: http://economictimes.indiatimes.com/articleshow/4480644.cms?flstry=1

MF AUM Rose By Means Of 11.76 Per Cent In Apr 09

Mutual fund industry registered rise in Average Asset Under management (AUM) in April 2009. The AUM of the industry has increased by 11.76% (Rs 58013.38 crore) to Rs 5.51 lakh crore in April 2009 compared with Rs 4.93 lakh crore in March 2009. AUM of funds of funds (FoFs) stood with Rs 706.29 crore in April 2009.
The increase in AUM is due to huge inflow in liquid funds, where banks and corporates invest heavily and also due to the recent recovery in equity market. According to the data released by RBI, banks had an outstanding investment of over Rs 85,000 crore in MFs as on 10 April 2009 against Rs 45,134 crore as on 27 March 2009.
The corresponding figures for the past year stood at Rs 50,950 crore and Rs 18,692 crore, respectively.
Out of 35 fund houses posted the Average AUM, 31 fund houses has recorded inflow and remaining 4 fund houses posted - outflow in April 2009. Baroda Pioneer MF has reported the impressive rise of 66.25% in April 2009 compared with March 2009.
All the top three funds recorded an inflow in April 2009. Reliance Mutual fund continued to be in the first position with AUM of Rs 88387.99 crore in April 2009 and its AUM has gained by 9.17% in April 2009 over March 2009. HDFC MF retained its second position with the average AUM of Rs 63880.63 crore a rise of 10.22% compared with the month of March 09 and ICICI Mutual Fund stood with an AUM of Rs 56049.28 crore and it rose by 8.98% in April 2009 over March 2009.
The other top mutual funds, in terms of AUM, UTI MF rose 11.76% to Rs 54489.99 crore in April 2009. Birla Sun Life MF has increased by Rs 4733.04 crore (10.05%) to Rs 51829.27 crore in its AUM and SBI MF also registered an impressive rise of 17.03% to Rs 30875.02 crore in April 2009 over March 2009.
Reliance MF registered the highest inflow in AUM of Rs 7425.05 crore, while HSBC MF recorded the outflow of Rs 253.91 crore, it was down by 2.65% in April 2009 over March 2009.
In the category of fund houses maintaining AUM between Rs 10000 -20000 crore, Sundaram BNP Paribas Mutual Fund surged by 20.45% to Rs 11161.77 crore in the month of April 2009 over March 2009. Deutsche Mutual Fund has gone up by 18.77% to Rs 11110.79 crore in April 2009.
In the category of MFs maintaining AUM between Rs 10000 - 1000 crore, Baroda Pioneer MF went up by 66.25% to Rs 1882.01 crore and DBS Chola has risen by 57.44% to Rs 1611.40 crore in April
2009 over March 2009, while ING MF was down by 6.95% to Rs 2353.08 crore and HSBC down by 2.65% to Rs 9321.28 crore.
The fund houses with relatively smaller corpus having AUM less than Rs 1000 crore has registered rise in their AUM, except Edelweiss and Benchmark MF. Taurus MF was up by 65.49% to Rs 344.82 crore and Sahara MF went up by 27.34% to Rs 185.82 crore, While Edelweiss registered a fall of 34.63% to Rs 14.57 crore in April 2009 and Benchmark MF's AUM declined by 12.11% to Rs 939.11 crore in April 2009 compared with March 2009.

ING appoints head of Indian mutual fund unit

ING Groep's Asia-Pacific fund arm has named Navin Suri as chief executive of its Indian mutual fund unit, filling a position lying vacant since January.
Suri, a former Citibank executive in Singapore, joined ING Investment Management, India in August 2008 as vice president and director for sales and distribution and has spent more than 17 years in financial sector in the Asia-Pacific region.
ING had on Dec 18 said it was shifting its chief executive Vineet Vohra to Singapore, a week after its Indian unit's director for research and investment Paras Adenwala left.
The firm, which manages about 23 billion rupees in India, is yet to replace Adenwala.

Source: http://in.reuters.com/article/domesticNews/idINBOM48196820090504

Playing safe, new pension plan halves equity cap to 50%

Contrary to its earlier draft, the New Pension Scheme (NPS) for all citizens to be launched on May 1 has capped the equity exposure fund managers can take on investments made by subscribers at 50 per cent. The draft investment guidelines issued by the Pension Fund Regulatory and Development Authority (PFRDA) earlier had recommended that equity exposure can go up to 100 per cent.
“The idea is to distinguish between mutual funds and pension funds, the latter being a long-term investment plan with an objective to provide individuals a safety net. Given the current market conditions, we were advised accordingly,” PFRDA chairman D Swarup told The Indian Express. However, he said that “we can review this cap after one year.”
After launching the NPS last year for those government employees who joined on or after January 1, 2004, the PFRDA has now opened the doors for the unorganised and private sector citizens.

Swarup said that the NPS “combines flexibility of choice of portfolio, fund managers and the quantum, frequency of investment.” A subscriber can decide the mix of his portfolio between three asset classes: G — Central and state government bonds, C — liquid schemes of mutual funds, fixed deposits of banks and corporate bonds and E — equities. The permissible equity exposure of 50 per cent will, however, be only through index funds, tracking either the 30-scrip BSE Sensex or the NSE’s Nifty 50.
The regulator has also put in place a default option that will work like a life-cycle fund. Up to 35 years of age of a subscriber, the fund will invest 50 per cent in equities, 20 per cent in Central and state government bonds and 30 per cent in the C category. Over the next 20 years, investment in equity will gradually be pared to 10 per cent. The fund will automatically redirect the money invested in equities to government bonds, the safest of all asset classes.
The NPS allows a minimum annual investment of Rs 6,000 and a minimum single deposit of Rs 500. The scheme will be distributed through 23 points of presence that include select banks, life insurers and asset management companies.
Pension fund managers will charge 0.009 basis points as fund management fee (Rs 900 for every Rs 1 lakh of assets managed). Life insurance and mutual fund companies charge between 1 per cent and 2.5 per cent of the fund value.
However, with other charges like a one-time registration fee of Rs 40, transaction fee of Rs 20 and Rs 350 as an annual CRA (central record keeping), the New Pension Scheme becomes a tad expensive for small-ticket investments. An investment of Rs 1,000 a month in a balanced mutual fund, for example, will entail total charges (entry loads and management fee) of about Rs 510 a year. The same investment in the NPS will attract Rs 640 as charges.
Investments made in Public Provident Fund (PPF), Employee Provident Fund (EPF) and Group Provident Fund (GPF) are tax exempt in all three stages of investment, accumulation and withdrawal. In the NPS, funds are taxed at the withdrawal stage. The regulator has been pushing for a level-playing field, but the government has not yet responded.
The pension money of the private and unorganised sector will be managed by six fund managers: ICICI Prudential Life Insurance, IDFC Asset Management Company, Kotak Mahindra AMC, Reliance Capital, SBI Pension Funds and UTI Retirement Solutions.

Source: http://www.indianexpress.com/news/playing-safe-new-pension-plan-halves-equity-cap-to-50/452904/0

Manage your own pension

Anybody can invest in a pension fund with the Pension Fund Regulatory and Development Authority (PFRDA) launching the facility for the general public. The scheme is similar to the one currently in operation for central government employees, which yielded an average return of 14.5% in 2008-09.
Under this National Pension Scheme (NPS), money invested in the pension fund during the working life of the investor will come back partly as a lumpsum and partly as an annual payment or pension.
The fund gives investors the option of deciding what level of risk they want to take, given the fact that higher returns are typically associated with higher risk investments. The fund will be invested in three kinds of assets — equity, government bonds and corporate bonds — and it is for the investor to decide how much should be invested in each of these.
Investment in equity is, however, subject to two significant caveats. First, it cannot be more than 50% of the amount in the investor's account. Secondly, fund managers cannot invest in shares of individual companies, but only in index funds linked to the BSE's sensex or the NSE's Nifty.
For those who would rather leave it to experts to decide what the balance should be, there is `auto choice' option. Under this option, for those aged 18-36, 50% of the amount in their pension account will be invested in equity, 30% in corporate bonds and the remaining 20% in government securities. From age 36 onwards, the proportion of investments in equity and corporate bonds will decrease annually while that in government securities will increase till the mix reaches 10% in equity, 10% in corporate bonds and 80% in government securities at age 55.
Under the scheme, you can invest any amount, though tax benefits will be available only up to Rs 1 lakh under Sec 80C. The minimum annual contribution, however, has been mandated at Rs 6,000.
The fund will be managed by six fund managers, appointed by the government at annual fees of 0.0009% of the invested amount, which is less than one paise per Rs 100. The fund managers appointed by the PFRDA are SBI, UTI Asset Management, ICICI Prudential Life Insurance, Reliance MF, IDFC Mutual Fund and Kotak Mahindra.
To open a pension account, you will have to approach the branches of any of the 22 `point of presence' (POP) service providers selected by the authority. These include State Bank of India and all its seven subsidiaries as well as ICICI Bank and Punjab National Bank. PFRDA Chairman D Swarup said that to start with there would be around 300 POPs in the country, which will soon be ramped up to more than 10,000.
The investor's account will be kept by a record keeping agency appointed by the PFRDA. However, the investor will need to interact only with the POP, where he can deposit his annual/monthly contribution.
The scheme gives the investor the option of shifting from one fund manager to another, merely by instructing his POP to do so. The POP will inform the same to the record keeping agency, which will shift the fund to the new fund manager, selected by the investor.

Source: http://timesofindia.indiatimes.com/India/From-today-manage-your-own-pension/articleshow/4469763.cms