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MFs oppose monthly AUM declaration

Chandan Kishore Kant / Mumbai August 5, 2010, 0:38 IST Source:

http://www.business-standard.com/india/news/mfs-oppose-monthly-aum-declaration/403575/

Amfi board to discuss demand that only retail numbers be released every month.

The continuing fall in their assets under management (AUM), especially on the equities side, has forced fund houses to approach the industry body, the Association of Mutual Funds in India (Amfi), to stop publishing this data on a monthly basis.

“Most of us feel that monthly data do not give the correct picture. In some months, there are huge withdrawals by companies and high net worth individuals due to advance tax payments. This amount is reinvested soon. But there is too much hype over these periodic outflows,” said the CEO of one of the largest fund houses.
  

FAST FIGURES
Month	AAUM	Chg (%)	Net inflow/(outflow)
January	7,61,440.37	-4.14	97,242
February	7,81,525.72	2.64	6,365
March	7,47,338.62	-4.37	(1,62,165)
April	7,69,129.61	2.92	1,85,956
May	8,03,559.06	4.48	-62,960
June	6,75,863.57	-15.89	(1,19,449)
July	6,65,567.42	-1.52	NA
All figures in Rs crore; Change (%) is month-on-month Source: Amfi

He explained that institutional money was a direct reflection of liquidity in the system, which fluctuates. Instead, the industry has said that monthly data of only the retail segment should be declared. “Retail money is mostly long term. It will provide a better picture,” added the CEO.

Every month, MF houses have to declare their average AUM at the beginning of the month, on Amfi’s website. Industry players feel the overemphasis on AUM leads to unhealthy competition among the players. “There is a huge rush to garner assets, even if they are short term, to shore up the numbers,” said another industry source.

It is learnt that Amfi will discuss the issue in its board meeting soon.

Amid several regulatory changes in the past year, the 40-player domestic fund market is still finding it tough to adjust.

The industry is continuously losing folios and equity assets.

Banning entry load on equity schemes last year was the biggest game changer, followed by more regulatory measures. 

“The industry is still settling down to these changes. There are new guidelines on debt instruments whereby they will be marked-to-market. This may lead to some uncertainty in the debt market as well,” said an insider.

In June, the industry’s assets dipped around 16 per cent, the sharpest fall since the October crisis of 2008.

They further slipped in July, though marginally, by 1.5 per cent. In contrast, the first month of a new quarter normally sees inflows, as was witnessed last July when assets rose by Rs 20,000 crore.

Update on MFRT Meet In Kolkata

Kanak Kr Jain,CFP,LUTCF(IN),FSS

Secretary ASK Circle

Nilhat House,6th Floor, 11 R.N.Mukherjee Rd, Kolkata 700001

Ph 40053573

HDFC Fund Manager Prashant Jain

Published on Mon, Aug 02, 2010 at 09:13   |  Updated at Mon, Aug 02, 2010 at 16:06  |  Source : Forbes India

Prashant Jain is the biggest and the best fund manager in the country. 

For the ninth year running, the fund he manages is top of the charts

Prashant Jain reminds you of the Energizer bunny. Sure, he looks nothing like the lovablecharacter straight out of the long-running television commercial. But his nine-year winning streak at HDFC Mutual Fund is the talk of the mutual fund industry. And why not? With a corpus of Rs. 86,600 crore, it is the 800-pound gorilla of the business. Which is why, every move its 42-year old executive director and chief investment manager makes is followed actively by investors, analysts, the media and even those in his peer group. 

Two of his funds, HDFC Equity and HDFC Top 200 have delivered returns of 28 percent over the last decade and are, without doubt, the best-run funds in the India. He has followed his convictions even if it meant underperforming in the short-term — like he did in 2007. Be that as it may, he has consistently emerged tops. Little wonder then, he is often voted as the one of the best CIOs by research houses like Morning Star, Mercer and several media publications. And if all that isn’t enough, the gold standard in the business, Lipper — a mutual fund research and rating firm — reckons HDFC Equity, has for each of the last five years , been the star performer in the 10-year category.

Now, Jain is the kind of man who doesn’t dwell on these facts. But fact is the sizes of these funds are increasing geometrically to its returns. HDFC Equity fund has a total corpus of Rs. 6,734 crore; the Top 200 fund is now over Rs. 8,020 crore. The latter, just moved ahead of Reliance Growth Fund, until then the biggest scheme in the country with total assets under management at Rs. 7,681 crore.

 

The problem as everybody sees it is this: Beyond a certain size, it becomes harder to beat the market because mutual fund managers typically bet on mid-cap stocks to boost returns. At the same time, they have to ensure that they don’t bet the house on it. Normally, when the corpus is small, there is no problem. However, as a fund grows, the asset manager faces a dilemma.

If he maintains investments in mid-caps, he ends up locking in very large sums of money there. So, assuming the market falls for whatever reason, there’s a good chance he won’t liquidate the stock on time. And if investors insist on redeeming their units, it becomes tough to rustle up the cash, resulting in a liquidity crisis.

Until now, Jain has performed an incredible balancing act. “Prashant Jain is one of the most balanced fund managers you can come across in the country,” says Hansi Mehrotra, investment consultant, Mercer. “He has delivered high returns with low risks. If you look at all the risk and return parameters, he comes off as a winner. He is truly consistent in his performance,” she continues.

Regards

Barathwaaj

Chennai: +91  98418 - 25188

    

Mutual Funds see increase in consumer complaints

Mutual Funds see increase in consumer complaints

Submitted by Sameer Kapoor

After facing a continuous depletion in the asset base, the mutual fund industry is also facing a tough question. The number of consumer complaints faced by, the industry have increased dramatically.

Most of the complaints are with respect to the redemption proceeds and non-receipt of dividends. These are the areas which are turning out to be the biggest worry not only for the investors but also for the people.

To be able to solve such troubles, market watchdog, SEBI had asked the fund houses to display investor complaints on their websites as well as that on the site of Association of Mutual Funds in India (AMFI).

Latest data shows coming up on AMFI, 37 fund houses have received 61,604 'non-receipt of dividend' complaints in the financial year 2009-10. Out of these, 51,509 complaints pertaining to non-receipt of redemption proceeds; the remaining are related to non-updation of PAN, bank details, nomination, et al . These got 42,515 complaints from investors.

While the industry said that such cases appear because of negligence on part of the investor, for the customers the culprit is within the companies. They say that they are not given proper information and so the whole trouble happens.


Regards

Barathwaaj
Chennai: +91 98418 - 25188

Facts and Figures

Dear All,

These are some facts and figures


Average 3 Yrs Equity Mutual Fund Returns    :    6.7 %

Appx. 40 % of the Funds underperformed the average.

Average 3 Yrs E L S S Mutual Fund Returns    :    6.8 %

Appx. 60 % of the Funds underperformed the average.

Average 3 Yrs Closed Ended Equity Mutual Fund Returns    :    4.1 %

Appx. 60 % of the Funds underperformed the average.


Bank Interest prevailing 3 yrs back was 10 % to 13 %.



Average 1 Yr Bond  Mutual Fund Returns    :    4.8 %

Appx. 45 % of the Funds underperformed the average.

Average 1 Yr Gilt Mutual Fund Returns    :    2.5 %

Appx. 65 % of the Funds underperformed the average.

Average 1 Yr Floating Rate Mutual Fund Returns    :    4.3 %

Appx. 65 % of the Funds underperformed the average.

Bank Interest prevailing 1 yr back was 5.5 % to 6 %.


Please note :

This data is noted as on 31.05.2010 From Value Research

It is being widely debated, as to why people are shying away from
mutual funds, and are in fact withdrawing their investments. The above
date clearly shows why fundamentally the bank has been the better
option. Normally, market investments carry higher risk due to markets,
and so normally investors look to invest in them to get better returns
for the risk that they take. However we note that investors have not
been compensated sufficiently for the risk that they have taken.

So, the notion that investors are shying away from investing in the
mutual funds, due to distributors taking the back seat, as their wings
have been virtually chopped off since Aug 2009, is totally incorrect.

Just 3 yrs back many investors were queing up to AMC offices, applying
online, calling up the distributors, hurrying, borrowing to invest in
I P Os. Now, nobody is doing that. People were voluntarily queing up
to apply for IPOs. Most IFAs were not selling IPOs.

Why? The reason is obvious. Lack of returns. The market may be @
18000, but where are the returns? If these be the returns when the
market is @ 18000, imagine the returns, if the markets were still
languishing.

Also imagine the returns, if you take into consideration entry loads,
or the upfronts that they are expected to pay us. What returns will be
left in their hands, that too in the peak of the market? A point to
ponder?

Moreover, a majority of the funds have given sub par returns. This
gives a bleaker picture than most would imagine.

In such a scenario, how do we expect investors to invest in mutual funds?

I think that we have to put our minds together, and shift the focus to
the Fund Houses, to up their ante and find ways and means of improving
their performances, vis-à-vis the average, so that the investors do
not get a raw deal, in markets as volatile as they are.

I invite suggestions, on my observations, and suggestions on the road
going forward in the light of my observations.

Harish
Time Financials


Note: Please register your comments down here so every one can read

Templeton Issue

Dear Colleagues,

I have received a letter from Franklin Templeton seeking to make amendments to the agreement with them for distribution services. While most of the clauses seem routine and as per SEBI diktat, clause 2 reads as follows.

" Notwithstanding anything contrary contained elsewhere in the agreement/declaration/undertaking (if any), the distributor hereby agrees that investors shall have unfettered and unrestricted access to transact and /or communicate in relation to any matter with Franklin Templeton Mutual fund / FTAMIL. The distributor agrees to inform customers about the same and provide such information as may be required by FTAMIL in connection thereof."

The letter also requests distributors to sign the letter as a token of acceptance and return within 30 days but goes on to say ......."Notwithstanding the foregoing requirement, the contents of this letter shall be binding between us from the expiry of 30 days from the date of this letter.

The letter dated 24th June, 2010 was delivered to me on 13th July, 2010.

I would appreciate your views on this matter and would like to know if you too have received such a letter.

--
Best regards,

Allan Govias
Horizon Financial Services
New No.27, 2nd Floor
5th Street, Padmanabhanagar
Adyar,
Chennai 600 020
Tel: +91 44 2491 4862
+91 44 2446 1808
Mobile 0 98410 94840

Reply by Mr. Srinivasan of Money Kare

Dear All,

THIS IS A VERY IMPORTANT ISSUE PLEASE DO GO THROUGH AND RESPOND:

In continuation to below mentioned email of Mr. Allan we have contacted the local branch of Templeton on this issue, they say it is a clause specifically intended for MNC banks like Citi and HSBC which have online client accounts. The said accounts are operated by the client through the banks online platforms. The client can buy and sell the units of various mutual funds at one instant. There will not be any interaction between the client and concerned mutual funds the Bank will be the only face of contact for the client. Sebi has now it seems (have to be verified) made it mandatory for all the mutual funds to allow all the mutual fund investors to approach the concerned mutual fund directly if he wants to buy or sell its units. Till now the concerned MNC bank was the only face for the client thus making it difficult for the client to buy or sell even if he has closed the bank account.

Now coming to this clause: With regard to distributors like us IFA's, ND's etc. the client at any point of time can directly approach the concerned mutual fund and do any kind of transaction. In such a scenario WHY SHOULD WE ALSO SIGN THIS CLAUSE. I think we have to ask this question to the concerned officials.

That apart the Distribution Agreement signed by an IFA and that of a Bank are totally different. So Templeton can't ask us to sign a generic amendment agreement.

We request all the IFA's to send a mail to the concerned Relationship Manger or officials related to the registration and get the clarification. Till such time we request all to withhold the document. As it is we are giving the entire data to the mutual funds why should we further sign a amendment document and further complicate the relationship. Even if you have signed it please call back the document and keep it with you till we get a clarification.

Secondly, the deadline of 30 days offered by Templeton is ridiculous we don't know what will be the legal implication of the same. The letter dated 24th June 2010 and the same was received by us only on 13/07/2010. The letter states:

" We request you to affix your signature and/or seal in the place provided below and return one copy of this letter within 30 days from the date of this letter. Notwithstanding the foregoing requirement, the contents of this letter shall be binding between us from the expiry of 30 days from the date of this letter".

We think they cant impose on us such things.

Those who are aware of the legal complication of both these clauses kindly respond immediately.

Regards

Srinivasan S

MONEY KARE
Mobile No. 9841016902

Revision of Exit Load

FRANKLIN TEMPLETON MF REVISES EXIT LOAD STRUCTURE UNDER ITS SCHEMES (ON JUN 30 , 2010)

Franklin Templeton Mutual Fund has planned to revise the exit load structure under its schemes, Templeton India Ultra short Bond Fund and Templeton Floating Rate Income Fund - Long Term Plan. As per the revision, Templeton India Ultra-short Bond Fund will not charge any exit load and Templeton Floating Rate Income Fund - Long Term Plan will charge an exit load of 0.25 per cent if the investments are redeemed within 30 days from the date of allotment. The revision is effect from 30th June, 2010. Both the schemes are managed by Mr. Sachin Padwal-Desai & Mr. Pallab Roy and benchmarked against CRISIL Liquid Fund Index. HDFC MUTUAL FUND REVISES EXIT LOAD STRUCTURE UNDER HDFC SHORT TERM PLAN (ON JUN 29 , 2010) HDFC Mutual Fund has planned to revise the exit load structure under its scheme HDFC Short Term Plan. As per the revision, scheme will charge an exit load of 0.50 per cent if the investments are redeemed within 6 months from the date of allotment. The revision will be effective from 01st July, 2010. Currently the scheme charges 0.50 per cent of exit load if the investments are redeemed within 3 months from the date of allotment. HDFC Short Term Plan is an open ended income scheme with the investment objective to generate regular income through investment in debt securities and money market instruments. The scheme is managed by Mr. Anil Bamboli and Mr. Anand Laddha and benchmarked against CRISIL Short-Term Bond Fund Index. ICICI PRUDENTIAL MUTUAL FUND REVISES EXIT LOAD STRUCTURE UNDER ITS GILT FUND (ON JUN 29 , 2010) ICICI Prudential Mutual Fund has planned to revise the exit load structure under its scheme ICICI Prudential Gilt Fund – Investment Plan – PF Option. As per the revision, scheme will charge an exit load of 1 per cent if the investments are redeemed within 1 year from the date of allotment. The revision will be effective from 29th June, 2010. Currently the scheme does not charge any exit load. ICICI Prudential Gilt Fund – Investment Plan – PF Option is an open ended gilt fund with the investment objective to generate income through investments in Gilts of various maturities. The scheme is managed by Mr. Kuldeepsinh Jagtap and benchmarked against I-Sec Li-BEX. UTI MUTUAL FUND REVISES EXIT LOAD STRUCTURE UNDER UTI DYNAMIC BOND FUND (ON JUN 28 , 2010) UTI Mutual Fund has revised the exit load structure under its scheme UTI Dynamic Bond Fund. As per the revision, scheme will charge an exit load of 0.50 per cent if the investments are redeemed within 30 days from the date of allotment. The revision has been effective from 25th June, 2010. UTI Dynamic Bond Fund, is an open ended income scheme, with investment objective to generate optimal returns with adequate liquidity through active management of the portfolio, by investing in debt and money market instruments. The scheme is managed by Mr. Puneet Pal and benchmarked against CRISIL Composite Bond Fund Index.

Compulsory Demat account for MF

Dear Members of IFA Galaxy,

SEBI has asked AMFI’s suggestions on having compulsory demat account for Mutual Fund investors. AMFI will be providing its suggestions on June 15.

SEBI is of the view that demat accounts be made mandatory but AMFI is suggesting to keep it optional.

For your reference:
http://www.financialexpress.com/news/Sebi-wants-mandatory-demat-accounts-for-mutual-fund-investors/632791/

I have few queries in this regard.

1. After the abolition of entry loads many IFAs have already stopped selling MFs. Does compulsory opening of demat accounts spell doom for IFAs, since majority of the business will shift to brokerage houses?

2. If majority of people who hold physical mutual funds shift to demat form, then does this defeats the very purpose of long-term investment of MFs? Will MF investors become traders just like stock brokers?

3. SEBI has allowed brokerage houses to charge on every buy and sell of MF units on the stock exchange but there is hardly any commission left for IFAs. Moreover, stock brokers hardly have any knowledge of MFs. Isn’t this a double standard by the market regulator?

4 Having a demat account also requires giving a power of attorney to the brokerage house. Will this leave investor at the mercy of stock brokers?

5 Will this move help in penetration of Mutual Funds in tier two and tier three cities?

6 Does it serves investor interest?


As I understand that some of these are regulatory issues, I can ensure anonymity of your views on some of the answers. Please respond your views before 11 am on Monday as the same is to be taken up by IFA Galaxy with AMFI / SEBI and Media

Regards,
Ramesh Bhat
IFA Galaxy

Investment Ideas for 2010

Source: Business Line http://www.thehindubusinessline.com/iw/2010/01/03/stories/2010010350800800.htm

Investment ideas for 2010

---

Here there are three funds from the large and mid-cap space that investors can consider for long-term wealth creation.

---

Suresh Parthasarathy

The year 2009 started off on a subdued note for equity investors but by year-end both the BSE Sensex and Nifty were trading 80 per cent higher. With the markets trading at a price-earning multiple of well over 21 times from 11 times at the start of year, the upside in the indices may be limited from here on. So equity investing in 2010 may require greater stock selection skills. Why not select actively managed diversified funds for your portfolio?

In emerging markets such as India there are several diversified funds that have managed to deliver better-than-index returns. However, these funds, even if they deliver better returns, may also, at times, take on higher risk.

While comparing the top performing equity schemes whose returns are identical, investors can look at additional factors such as beta and expense ratio to gauge the risk return profile. Investors planning to take exposure to equity funds should, of course, pick funds with a proven track record over an entire market cycle.

Here there are three funds from the large and mid-cap space that investors can consider for long-term wealth creation.

HDFC Top 200: This fund is among the few to consistently remain on the buy list due to its steady returns across market cycles. Its performance over the year has validated our recommendation.

HDFC Top 200, which invests in the top 200 companies by market capitalisation, despite its ever growing asset size (Rs 5,781 crore) continued to maintain its tempo and beat its benchmark BSE 200 by a wide margin.

For instance, over a three- and five-year period, the fund outpaced its benchmark by 10 percentage points. Even during the market meltdown in 2008 the fund contained the losses better.

In 2008 when most of the funds preferred to move in to cash to protect their portfolios, the fund had the grit to stay invested. This helped in a neat recovery from the market lows; the fund went on to generate returns of 96 per cent over a one-year period and was one among the top ten performers over this time frame. In its November portfolio, the fund's preferred sectors were banks, pharma and consumer non-durables. Despite its huge asset base the fund adopts a buy and hold strategy. To prop up its return, the fund invests 10-15 per cent of the assets in mid-cap stocks (with market capitalisation less than Rs 7,500 crore).

DSP BlackRock Equity: DSPBR Equity and DSPBR Top 100 more or less has similar investment strategy in selecting sectors. But the former invests sizable assets in mid- and small-cap stocks while the latter sticks to its mandate of investing in large caps. The advantage of DSPBR Equity is that the fund prefers to stay invested in equities irrespective of the market condition and despite the presence of the mid and small-cap stocks (this segment being more prone to volatility). This demonstrates the fund's conviction in its investment strategy. Even during 2008, with reasonable exposure to mid and small-cap stocks and lesser cash position it withstood the market correction and contained losses. Clearly, stock-picking strategy has held the key. Though the fund is benchmarked against Nifty, one-third of the assets are invested outside the Nifty basket.

For the risk it has assumed the fund compensated its investors and concurrently outpaced its benchmark by over 10 percentage points over three and five-year periods. Good stock selection strategy and a lower beta than its peer DSPBR Top 100 were key reasons for DSPBR Equity being a better choice for your portfolio. In its November portfolio the fund's top sectors were software, consumer non-durables and pharma.

Birla Sunlife Midcap: A consistent performer across the market cycles, this fund outpaced its benchmark over a three and five-year period by a good margin and can lend support to one's portfolio returns. It is therefore worthy of a place in your core portfolio.

Having said this, some large cap funds with lower risks generated returns as good as the top performing mid-cap funds over the past five years. Midcap funds such as Birla Midcap generated very good returns during the bull phase of the market compared with lesser “beta” stocks, implying that they have the ability to identify the winner ahead of market rallies.

The fund also dilutes its holding risky sectors once there are signs of over-heating and moves to defensive sectors to protect its portfolio.

The fund's one-year performance emphasises that it has timed its sector calls well during this ongoing rally. However, given the extraordinary gains that this fund generates during bull phases, investors would do well to occasionally book profits to cash in on such rallies. In its November portfolio the top three sectors were banks, power and finance which together accounted for less than 30 per cent of the assets. The fund has a well diversified sector allocation and its assets are spread across 22 sectors.