Mutual Fund NEWS Group

Thursday, December 23, 2010

Kotak Mahindra Mutual Fund announces conversion of its scheme into open ended

Kotak Mutual Fund has announced the conversion of it scheme - Kotak Indo World Infrastructure Fund, a three year close ended equity scheme into an open ended equity scheme, with effect from 27th January, 2011. There will be no changes to any other fundamental features of the scheme on being converted into open ended scheme except that scheme is converted from close ended to open ended scheme. The scheme will charge an exit load of 1 per cent if exited within 1 year from the date of allotment of units and nil if exited after 1 year from the date of allotment of units. The unitholders of the scheme who are not in agreement with the conversion may redeem their units at applicable NAV or switch to other open ended schemes of Kotak Mutual Fund without payment of exit load between 25th December, 2010 and 25th January, 2011.

Source: http://www.mutualfundsindia.com/news_viwe.asp?news_headline=Kotak+Mahindra+Mutual+Fund+announces+conversion+of+its+scheme+into+open+ended@MF037

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'I made my money by selling too soon.'

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Tuesday, December 21, 2010

Sundaram Rural India Fund declares dividend

Sundaram Mutual Fund has declared a dividend of 30% (Rs 3 per unit on a face value of Rs 10) under the dividend option of Sundaram Rural India Fund . The record date for dividend has been fixed as December 24, 2010.

All investors registered under the dividend option of Sundaram Rural India Fund as on December 24, 2010 will receive the dividend. The NAV of the scheme as on December 20, 2010 was Rs 14.486 per unit.

Sundaram Rural India Fund is an open ended growth fund. The primary objective of the scheme is to generate consistent long term returns by investing predominantly in equity / equity related instruments of companies that are focusing on rural India.

Source: http://www.moneycontrol.com/news/mf-news/sundaram-rural-india-fund-declares-dividend-_506213.html

Equity fund managers hop jobs

When Peter Lynch left the job of managing US equity fund Fidelity Magellan fund in 1990, he had spent a solid 13 years managing the fund. During his tenure the fund consistently gave returns that beat the market to become a $13 billion fund in terms of assets. Popular wisdom has it that a long association of a fund manager to a mutual fund scheme does wonders to its performance. Even investors are known to be comfortable investing in funds where managers have been around for a longer period.

Interestingly, in this regard, Indian equity fund managers have been found to be fleet-footed compared to their US counterparts. Perhaps with few exceptions like Prashant Jain who has remained associated with HDFC fund for more than a decade, the average tenure of an equity fund manager is less than 2 years. On the other hand, in developed markets like the US and the UK, fund managers have been known to have long-term associations of 10-15 years. Among Indian equity funds, Reliance Growth, UTI Equity Tax Saving, Sundaram Select Focus, FT India Life Stage fund of fund—have had managers managing the fund for more than 8 years. HDFC Prudence is perhaps the fund with longest association— Prashant Jain has been its fund manager for 16 years. Sunil Singhania, head of equities at Reliance Mutual fund says, "Certainly the performance of the funds also depend largely on the tenure of the fund manager. Also, frequent change in the fund manager brings portfolio change and difference in investment strategy."

While every fund house endeavours to mitigate the risk of the manager quitting, by standardising the risk management measures, stock picking is also believed to be an individualistic attribute. "There is a constant pressure to not only outperform but also remain on the top. It has led to many fund managers quitting the industry to join private equity and hedge funds." says the CEO of a leading fund house on condition of anonymity.

It is also being increasingly seen that a single fund manager co-manages over 4-5 schemes, all thanks to spate of new NFOs.

TP Raman, MD of Sundaram MF says, "If a fund manager sticks to his style of investment then there is no cause of worry."

He adds that, consistent good performance is possible only if one fund managers stay for a longer tenure.

Source: http://www.financialexpress.com/news/equity-fund-managers-hop-jobs/727249/0

Investors will benefit by investing in Religare Bond Fund: Saurabh Nanavati, Religare Mutual Fund

In an interview to ET Now, Saurabh Nanavati , Chief Executive Officer , Religare Mutual Fund , presents his outlook on bond markets and Religare Medium Term Bond Fund .

Why have you timed this fund offering at a time like this because everyone believes that interest rates are only halfway on their up?

Interest rate hikes are almost done. We are expecting another 25 basis point hike in the Jan to March quarter but post that, interest rates should stabilise. This fund was missing in our product suite and we did a lot of research at the ground level where retail investors were very comfortable investing in bank deposits between 1 year to 5 years and what we thought was if we could come out with the fund where the mandate explicitly states that we will be investing in papers up to 5 years maturity and provide liquidity to the customer also backed by the tax efficiency of mutual funds and active fund management which could generate higher returns. The fund was pretty opportune for us in terms of launching at this point of time as also completing our product suite on the debt side.

You say that you expect rates to go up just by quarter percentage point maybe in January. The majority of people we speak to believe that rates will go up by 50 to 75 basis points maybe by July-August next year. So why do you believe that interest rate hikes are pretty much at the end of their climb up?

Inflation which is the key concern of the central bank is now coming down and it could perhaps even touch their targeted levels at 5.5%. Having said that, even the RBI report mentioned that there was an upward bias. Because of the last 3 months, what we have seen is commodity prices have moved up significantly, food prices have moved up, the oil price hike last week will add close to 60 basis points. So to that extent, there is an upward bias on the inflation target but from a rate hike perspective, what we have seen over last 18 months maybe another 25 basis points or at best another 50 basis points post which RBI will have an adequate enough buffer as compared with the developed economies and then they can again get back to focussing on growth in the coming year. So interest rates will stabilise from April onwards and that stabilisation in terms of interest rates not changing could remain for a one-year period.

What about the quarter third earnings that we will see trickle in in January? How big an important cue do you think would they be for the market as such and to provide direction? What is the Sensex earnings growth forecast that you have at Religare?

For the year ending March 2010, the Sensex earning was close to around 840. March 2011 will end at close to 1040 and one year down the line, March 2012, our estimate is close to 1250. So we are projecting an 18% to 20% growth rate for Indian corporates for next year.

You are expecting that interest rates will stabilise by April, why should I as an investor be putting my money into your fund right now if you are saying that interest rates will stabilise by April and that is really when a bond fund like the one you are offering today will actually start seeing the benefits of declining interest rates? Why should I put money in now?

This fund is not a close ended fund. It is an open ended fund. So investors can invest at any point of time and what we are basically telling investors to continue investing month on month, quarter on quarter in this fund. The reason why you should invest at this point of time, the short term rates are extremely attractive at this point of time. We are looking at a flat yield curve in India which does not do justice to an economy actually which is growing at over 8% at this point of time. So this yield curve flattening is purely because of liquidity pressures. If you look back in May 15th just before the 3G auction period, banks were actually parking close to 1 lakh crores with the central bank and if we fast forward 6 months from there, at this point of time they are borrowing close to 1.5 lakh crores from banks. So the shift has been from positive 1 lakh to negative 1 lakh which is almost 2 lakh crores and because of that liquidity tightening phenomena, you are getting one year to 18 months bank CDs and corporate bond papers at anywhere from 9.5% to 10.5%. These levels are very very attractive. So if we can basically buy these bonds at this point of time and the one of the fund objective is also to hold these papers to maturity as far as possible, the investors will benefit by investing in these papers. 12 to 18-month segment is extremely attractive at this point of time.

If I could just point you to the fund offer document that you have put out. On the one hand you are talking about interest rates on 6 month to 2 year having risen by about 150 to 300 basis points. In the same document you talk about liquidity pressures in the system which are beginning to decline. Now everyone knows that interest rates at the shot having gone up is largely on account of the liquidity tightness. So these 2 comments in the offer document. Do not they run contrary to each other?

The liquidity crunch is a technical phenomena. It is primarily because one at this point of time the money in circulation with public has increased substantially to close to 80,000-90,000 crores in the last 9 months and because of negative real interest rate phenomena, they are not investing. The other aspect is government has close to 75,000 crores in the RBI account which traditionally would be at 5000 to 10000 crores only. So the government is not spending enough. We expect liquidity conditions to start easing from next quarter as compared with this quarter. The minute liquidity conditions start easing, the shorter term rates will come down. The other factor which you are pointing to is much longer in nature, much more fundamental based while the liquidity phenomena is a technical factor at this point of time.

Source: http://economictimes.indiatimes.com/opinion/interviews/investors-will-benefit-by-investing-in-religare-bond-fund-saurabh-nanavati-religare-mutual-fund/articleshow/7132957.cms?curpg=2

Monday, December 20, 2010

Bond yields soft; inflation worry weighs

Indian federal bond yields were steady to lower on Monday as the central bank's cash infusing steps on Thursday kept the market mood positive but traders were concerned that its hawkish take on inflation meant policy tightening sooner than later.

India's central bank left interest rates on hold on Thursday and unveiled steps to address persistently tight liquidity, but warned inflation was still well above its comfort level, raising the prospect that it will resume monetary tightening in January.

The central bank cut the statutory liquidity ratio -- the minimum level of deposits banks must hold in government approved securities -- to 24 percent from 25 percent, and unveiled 480 billion rupees ($10.5 billion) worth of bond purchases over the next month.

At 10 a.m. (0430 GMT), The yield of the most traded 8.08 percent, 2022 bond was at 8.01 percent, down from 8.02 percent at close on Thursday. It had fallen to 8 percent in early deals.

The yield of the benchmark 10-year 7.80 percent bond was steady at 7.95 percent. The bond market was shut on Friday for a local holiday. Volumes were a moderate 25.95 billion rupees ($570 million) on the central bank's trading platform.

"The market is starting to get worried about inflation. I feel the yield curve will steepen," said Ritesh Jain, head of fixed income, Canara Robeco Mutual Fund .

"Shorter end yields up to 2017 might not fall much or remain there and 2020 upwards will start correcting," he added.

The benchmark 10-year bond yield, which had risen to a 26-month high of 8.22 percent on Dec. 6 because of liquidity concerns fell as much as 30 basis points on Thursday after the central bank announced its cash support steps.

Some dealers said they waited for the details of bonds the central bank plans to buy as part of its bond purchase programme as well as this week's 110 billion rupees bond sale.

Indian bonds also found support in Friday's rally in U.S. Treasuries.

Local dealers said, however, bond players were cautious as clearing house data showed state-run banks were major sellers of bonds on Thursday with net sales of 40.38 billion rupees.

"There is still more room for yields to fall because the central bank will buy bonds for the next one month, but there are concerns that the market will have to go through a wall of selling by state-run banks before that," said a senior trader with a primary dealer.

The benchmark five-year overnight indexed swap was at 7.37 percent, down 2 basis points from Thursday.

The one-year overnight indexed swap was steady at 6.80 percent.

Source: http://economictimes.indiatimes.com/markets/bonds/Bond-yields-soft-inflation-worry-weighs/articleshow/7131646.cms

IDFC AMC sells 25% stake to Natixis

IDFC Asset Management Company has sold 25 per cent of its stake to Natixis Global Asset Management (NGAM) to enhance its distribution business, said a statement from the fund house.

The financial details of the deal were not disclosed, but sources close to the deal say that the deal is worth around Rs 300 crore.

This partnership would help IDFC AMC enhance its international distribution and gain access to global investors who are keen to invest in Indian equity markets, said the statement.

This would also help IDFC AMC provide international investment platforms to Indian investors.

As on September 30, 2010, NGAM had $719 billion (Rs 32 lakh crore) worth of assets under management.

NGAM has a presence in Asia, including Japan, Taiwan, Singapore and China.

Source: http://www.thehindubusinessline.com/2010/12/19/stories/2010121951520200.htm

‘India now is cheaper than the 2008 high'

Corporate governance issues, compressed business cycles and increased influence of global events on local markets have made decision making in equities a more complex affair for retail investors, feels Mr Sanjay Sinha, CEO, L&T Mutual Fund. In an interview with Business Line, he shares his views on the current valuations of Indian markets as well as on the divergence in earnings performance across sectors.

Excerpts from the interview:

What's your outlook on market and valuations?

Eleven quarters have passed since the previous January 2008 high and over these quarters, corporates have only advanced. So on a like-to-like basis, today at the same absolute level of the index, we are relatively cheaper. India valuation is also frequently compared with other emerging markets.

When that is done, we need to keep a couple of things in mind. One, the composition of earnings in India is very different. The Indian indices are broad-based, with a diverse sectoral representation, while some of these markets have a much skewed tilt towards, say, commodities.

Two, we need to look at the valuations in terms of India's outlook on the earnings growth. With a price-to-earnings multiple of 15 times and earnings outlook of 18-20 per cent growth for FY12, it is an open question if India should get the same valuations as some of its Asian peers.

What about sector-specific outlook? There's been a lot of divergence across sectors in terms of earnings performance.

. In the last couple of quarters, there have been significant changes, with interest rates hardening and commodity prices moving up.

These will obviously have a bearing on the earnings outlook. So while we may have the overall earnings remain in line, sectors that are vulnerable to interest rate hikes and commodity prices might see their margins under pressure. That said, we have also seen that the demand outlook for some of these sectors has been much higher than expectations. The first such confirmation will come in the third quarter results. It will reveal if demand growth can lead the economies of scale to absorb the increase in commodity prices and interest rates. But if it doesn't, then we'll have commodity-based sectors see an earnings upgrade while the sectors that are vulnerable to interest rates might suffer earnings downgrade.

What about infrastructure as an investment theme? Mutual funds investing on this theme haven't done as well in this market cycle.

There are couple of prominent reasons for their underperformance. One, following the global financial crisis the capacity expansions were put on hold as the demand outlook wasn't clear. With the resumption of growth in most of the economies, the capacity expansion plans are back on track. This will have an immediate rub-off effect on infrastructure-related projects.

Two, access to capital had become restricted earlier, but with the financial markets now opening up, the flow of capital is becoming freer. Three, in the Eleventh Five Year Plan, there was an ambitious target to spend Rs 20 lakh crore on the sector. However, the mid-term review showed that only Rs 8 lakh crore has so far been spent. While, it may not be practically possible to spend the balance in the remaining two years, one can expect to see some acceleration in the pace of infrastructure projects in the remaining two years.

With mid-caps suffering a crisis of confidence following allegations of insider trading, how should investors select mid- and small-cap stocks?

The key distinction between a good and bad company in the midcap segment is linked to two factors — one, the growth trajectory and two, the quality of corporate governance. It may, however, not always be possible for the lay investor to qualify the corporate governance standards of mid and small-cap companies. While there definitely is an interest to directly invest in equities, given the complexity of decision making and the fact that business cycles are getting compressed in time and that global events increasingly have had a bearing on most companies, it would be better for lay investors to confine investments to a limited number of stocks that can be tracked closely.

Source: http://www.thehindubusinessline.com/iw/2010/12/19/stories/2010121951160500.htm