Mutual Fund NEWS Group

Friday, December 3, 2010

Foreign MFs outpace domestic players in building assets

Assets rise 13% in first half, as local funds show a fall in AAUMs.

At a time the assets of domestic mutual funds are falling, those of foreign fund houses with presence in India, directly or through joint ventures, are growing remarkably.

Industry experts and chief executive officers attribute this to better products and the increasing familiarity of foreign funds with investors.

Statistics from the Association of Mutual Funds in India (Amfi) say foreign players' assets rose 13 per cent in the first half of the current financial year. Domestic fund houses either registered negative or poor growth.

For instance, in the private sector, Indian-owned fund houses saw a dip of 7.5 per cent in average assets under management (AAUMs) to Rs 2,17,899 crore as on September 30 as against Rs 2,35,585 crore at the beginning of the year. Foreign players in the private sector saw a jump of 14.5 per cent in AAUMs at Rs 57,577 crore. These include AIG Global Asset, Fortis Investment, Franklin Templeton and Mirae Assets, among others.

So, too, in joint ventures (JVs) predominantly owned by foreign players, whose assets have risen by close to 10 per cent. The assets of funds where an Indian partner is dominant have grown a mere 1.4 per cent.

"Foreign-owned fund houses are aggressively marketing their products and investors are getting familiar with them. Moreover, their products are equally good performers," said Dhruva Chatterji, senior research analyst at Morningstar India, an independent investment research firm.

"If the products are structurally well-positioned and perform well, I see no problem why people should not invest with us," said the chief executive officer (CEO) of a foreign-owned fund house. He said foreign players faced intense competition, as domestic counterparts and banks-sponsored asset management companies had the advantage of a strong distribution network.

Bank-sponsored fund houses SBI MF and Canara Robeco put together grew assets by 6.8 per cent.

In agreement with this, another CEO of a fund house in a JV with a foreign partner said, "In metros, the brand equity of foreign-owned houses has strengthened. The competition now is to penetrate Tier-I & II cities, which offer huge potential."

In the first half, the average assets dipped 4.6 per cent to Rs 7,13,290 crore from Rs 7,47,525 crore. Of the 41 fund houses in the country, 14 are fully or majority owned by foreign players.

Source: http://www.business-standard.com/india/news/foreign-mfs-outpace-domestic-players-in-building-assets/416955/

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Kotak Mutual Fund revises key features under its scheme

Kotak Mutual Fund has decided to revise key features under its scheme - Kotak 30. The scheme will be renamed as Kotak 50. The change will be effective from 01st January, 2011. The revised investment objective is to generate capital appreciation from a portfolio of predominantly equity and equity related securities. The portfolio will generally comprise of equity and equity related instruments of around 50 companies which may go upto 59 companies at any point of time. Investors, who do not agree to the revision, have an option to redeem or switch their units between 02nd December 2010 to 31st December 2010, without paying any exit load.

Source: http://www.mutualfundsindia.com/news_viwe.asp?news_headline=Kotak+Mutual+Fund+revises+key+features+under+its+scheme+@MF037

Thursday, December 2, 2010

MFs post highest profit in 2009-10

HDFC MF the most profitable, followed by Reliance, UTI & ICICI Prudential.

The domestic mutual fund industry recorded its highest profit after tax (PAT) in 2009-10. The industry's total profit rose four-fold from the previous financial year.

Importantly, the industry made such profits in a challenging year marked by several regulatory changes, like the infamous ban on entry load on equity schemes.

According to a report by the fund industry tracker, Morningstar, fund houses' consolidated profit after tax in 2009-10 stood at Rs 911 crore as against Rs 224 crore in 2008-09. Prior to the global financial crisis, the consolidated PAT had peaked in 2007-08 at Rs 427 crore, less than half of last year.

The industry profitability, measured by dividing the consolidated profit by total average assets for the financial year, rose sharply to 13 basis points in 2009-10 as against four basis points in the previous year.

HDFC Mutual Fund emerged as the most profitable fund house, with a PAT of Rs 208 crore, followed by Reliance MF (Rs 195 crore).

"The gross income of fund houses has risen substantially, resulting in higher profitability for the industry this year," said Dhruva Chatterji, a senior research analyst at Morningstar India.

Other fund houses that recorded strong profit growth in FY10 were ICICI Prudential, Birla Sunlife, Kotak and LIC, among others. The 10 largest asset management companies (in terms of assets) accounted for 80 per cent of the industry's gross income. In 2009-10, their consolidated profit rose 83 per cent, while the consolidated gross income climbed 41 per cent.

Smaller players, such as Quantum, Edelweiss, AIG and Mirae, managed a decent performance on the back of improved profitability.

The industry's chief executive officers were quite concerned over profitability last year.

The players whose profits dropped include Benchmark, Shinsei, Morgan Stanley, IDFC, Sahara and Baroda Pioneer.

Of the 38 AMCs, 15 were in the red during 2009-10, though their losses fell.

Source: http://www.business-standard.com/india/news/mfs-post-highest-profit-in-2009-10/416801/

Arbitrage funds outdo benchmarks in Nov

Volatile market helps boost performance.

Owing to the volatility in the market, November saw arbitrage funds doing much better than the benchmark indices.

While both the indices saw negative returns, these funds provided returns in the range of 0.5-1.2 per cent.

"Arbitrage opportunities were very good last month as the market was very volatile. These funds give risk-free returns even though they invest in equity, as the positions are already held," said Mr Raju Singh, mutual fund analyst with SBI Cap Securities. "Around five months ago, there were few such opportunities for these funds to do well. At one point their returns were even lower than that of liquid funds."

Arbitrage funds perform best in a volatile market. The objective of an arbitrage fund is to provide risk-free returns. Fund managers can hedge their risks by going long in the cash market and short in the futures market.

High returns

November saw a lot of volatility in the market with the Sensex falling by 834 points (-4.05 per cent) and the S&P CNX NIifty by 255 points (-4.17 per cent). The arbitrage funds saw higher returns.

Birla Sun Life Enhanced Arbitrage Fund gave the highest returns at 1.22 per cent, SBI Arbitrage Opportunities Fund was second at 0.98 per cent, followed by Kotak Euity Arbitrage Fund at 0.96 per cent.

Also, these funds do not have very high AUMs. The assets are usually around Rs 100 crore.

"This gives them an advantage as they can then consolidate their portfolios. Having lower AUMs means they can consolidate and diversify their investments," said Mr Hiren Dhakan, Associate Fund Manager, Bonanza Portfolio.

However, analysts said these funds can put up a better performance. "An arbitrage fund can generally provide 7-8 per cent in annualised returns. Therefore, these funds can actually give higher returns than what they are showing right now since the market is moving in a range," said Mr Dhakan.

"Arbitrage funds are the safest options as they always hold hedge positions and toggle between cash and the futures options. In that sense, their risk profile is lower. At no point will these funds perform badly because of their hedge positions, except when the markets are either steadily moving up or moving down," he added.

Source: http://www.thehindubusinessline.com/2010/12/02/stories/2010120251191000.htm

Motilal Oswal seeks nod for Nasdaq ETF

Motilal Oswal Asset Management Company Ltd and the Nasdaq OMX Group, Inc. have filed for an open-ended index ETF, Motilal Oswal MOSt Shares Nasdaq-00 ETF, which seeks to track the Nasdaq-100 Index.

The Nasdaq-100 consists of the top 100 non-financial companies listed on the Nasdaq stock market. "The MOSt Shares N100 will provide investors an opportunity for exposure to the US capital market," said Mr Rajnish Rastogi, Senior VP & Co-Head of Equities, Motilal Oswal Asset Management Company.

"It aims to provide Indian investors with a global, diversified, rupee denominated, Indian-market-hours access to high growth Nasdaq -100 Index companies such as Google, Microsoft, Apple and other leading global companies," said Mr Nitin Rakesh, MD & CEO of Motilal Oswal AMC.

Source: http://www.thehindubusinessline.com/2010/12/02/stories/2010120251321100.htm

Wednesday, December 1, 2010

Reliance Indonesia Opportunities Fund files offer document with Sebi

Reliance Mutual Fund files offer document with Sebi to launch Reliance Indonesia Opportunities Fund, an open ended diversified equity scheme. The New Fund Offer price is Rs. 10 per unit.

Investment objective: The primary investment objective of the scheme is to generate long term capital appreciation by investing predominantly in equity and equity related instruments of Indonesian and Indian markets and the secondary objective is to generate consistent returns by investing in debt and money market securities.

Plans/Options offered: The scheme shall have Growth Plan & Dividend Plan. Each Plan will have:

a) Growth Plan

a. Growth Option

b. Bonus Option

b) Dividend Plan

a. Dividend Payout Option

b. Dividend Reinvestment Option

Benchmark: A custom benchmark created using the MSCI Indonesia Index to the extent of 65% of portfolio and BSE 200 Index for balance 35% of the portfolio.

Loads: Entry load: Nil

Exit load: 1% if redeemed/switched on or before completion of 1 year from the date of allotment of units. Nil if redeemed/switched after completion of 1 year from the date of allotment of units.

Minimum Application Amount: Rs. 5000 and in multiples of Re. 1 thereafter

Minimum Target Amount: Rs. 1 crore.

Asset Allocation:

The scheme will invest 65%-100% in equities and equity related securities:

• 65%-100% in Equities and equity related securities of Indonesian Companies (Includes ADRs/GDRs issued by Indian companies or foreign companies, equity of overseas companies listed on recognized stock exchanges of Indonesia, units/securities issued by overseas mutual funds or unit trusts which are registered with Indonesian regulators and overseas exchange traded funds (ETFs) which are listed on recognized stock exchanges of Indonesia and are permitted by SEBI/RBI from time to time. The fund will also invest in initial and follow on public offerings to be listed on recognized stock exchanges of Indonesia.) (as permitted by SEBI/RBI from time to time)

• Upto 35% in equities and equity related securities of Indian Companies (Includes investments in ADRr/GDRs issued by Indian and Foreign Companies. The fund will also invest in Pre IPO Placement, lock-in non transferable securities and upto 5% or max permissible limit in Unlisted Securities)

The scheme shall also invest upto 35% in debt and money market securities.

Fund Managers: Shiv Chanani (Fund Manager -Overseas Investments) and Ashwani Kumar

Source: http://www.indiainfoline.com/Markets/News/Reliance-Indonesia-Opportunities-Fund-files-offer-document-with-Sebi/3427355008

GDP grows by 8.9%, FY11 outlook rosy

Agriculture and services sectors prove buoyant.

The economy grew at its fastest pace in ten months, clocking a growth of 8.9 per cent in the second quarter ended September. The numbers bettered industry and government expectations that GDP growth would run out of steam in the period. Growth was buoyed by a healthy increase in service sector and farm output.

The Central Statistical Organisation (CSO), in data released today, also revised the first-quarter growth figures from 8.8 per cent to 8.9 per cent on account of the new base year adopted in the calculation of inflation and industrial output. The growth numbers in the first half have revived hopes of a 9-per-cent-or-thereabouts growth for the whole financial year — higher than the government's estimate of 8.5 per cent.

"We may be confident that at the end of this year, GDP growth will not be less than 8.7-8.75 per cent. It may be more," said Finance Minister Pranab Mukherjee. He added that projections of over 9 per cent growth by the International Monetary Fund could be correct this time.

A growth of 9 per cent in 2010-11 will be significantly higher than the 7.4 per cent growth recorded in 2009-10 and 6.7 per cent in 2008-09. The government had projected 9 per cent growth in 2011-12. The last time GDP grew faster than 9 per cent was in October-December 2007-08 (9.3 per cent).

Asked whether the economy could achieve 9 per cent growth in the current fiscal, Finance Ministry Chief Economic Advisor Kaushik Basu said, "It is not impossible any more. We are very close to that."

In the second quarter, the farm sector recorded a growth rate of 4.4 per cent, a significant improvement over the 0.9 per cent in the same period last year. It was also higher than the 2.5 per cent recorded in April-June.

"The recovery in agriculture is likely to have a positive impact on rural demand in the coming quarters and maintain the positive momentum in the economy," said Chandrajit Banerjee, director-general, Confederation of Indian Industries.

The trade, hotels, transport and communications sector grew by 12.1 per cent, up from 8.2 per cent in the corresponding period last year and 10.9 per cent in the last quarter.

Manufacturing sector growth, however, fell to 9.8 per cent from 13 per cent in the first quarter this year. However, it was higher than the 8.4 per cent in the second quarter last year. The quarter-on-quarter fall was mainly because of a drop in industrial output to 4.4 per cent in September.

Mining and quarrying (8 per cent) and construction (8.8 per cent), financing, insurance, real estate & business services (8.3 per cent), and community, social and personal services (7.3 per cent) also showed a healthy rise.

Growth in some core infrastructural activities such as electricity, gas and water supply, however, was lower at 3.4 per cent.

Experts believe GDP growth in the next two quarters may be little lower than that of the first two.

Planning Commission Principal Advisor Pronab Sen stuck to the original forecast of 8.5 per cent growth. He said the 8.9 per cent growth registered in the first half of 2010-11 came on the back of a low base in the previous year and sustaining it in the second half would be difficult. He also indicated that the numbers may not prompt any monetary policy action.

The Reserve Bank of India has increased the repo rate by 150 basis points since April to control inflation, which eased to 8.58 percent in October from 11 per cent in April.

"We would be a bit cautious on second half growth, as monetary tightness and slow progress on infrastructure creation have by now started pinching all sectors of the economy," said Navneet Munot, CIO, SBI Mutual Fund.

He added, "The recent global developments have again shown the vulnerability of the global economy. In our opinion, further monetary tightness may be an impediment to sustain this high growth, a declining trend in inflation may just allow RBI to ease a bit on the policy front," said Navneet Munot, CIO, SBI Mutual Fund.

Today's data showed a revival in both consumption and investment in the first half of 2010-11, compared with the previous year when these indicators were subdued due to the global crisis. On the demand side, private consumption expenditure clocked a growth of 9.28 per cent on top of the upwardly revised 7.84 per cent in the first quarter.

"While we expected private consumption demand to improve, primarily backed by robust growth in the agriculture sector, such high growth has come as a positive surprise. However, this has also raised some concerns regarding the numbers and we expect to see some corrections in the demand side of GDP," said Arun Singh, senior economist, Dun & Bradstreet India.

Source: http://www.business-standard.com/india/news/gdp-grows-by-89-fy11-outlook-rosy/416730/