Wednesday, March 10, 2010

Diversified equity funds return 115% in a year

Principal Emerging Bluechip top performer with 201% returns.

What a turnaround for mutual fund investors it has been in the past one year.

Since March 9, 2009, (when markets touched their lows), when all class of investors were pessimistic about the market movement owing to the continuous flow of negative information, the markets have rebounded spectacularly, more than doubling in the period.

The average return of diversified funds was 115 per cent. Of 290 diversified schemes, 89 of them have clocked return in excess of 115 per cent and 125 of them outpaced the BSE Sensex.

For the same period the bellwether BSE Sensex moved up by 105 per cent (index on March 9, 2009 was 8160) and S&P CNX Nifty by 95 per cent.

Returns
It has been a year of golden returns for equity and mutual fund investors.

Investors who preferred to route their cash through mutual funds were laughing all the way to the bank, with some of the schemes clocking a returns of between 150 and 200 per cent.

Those who had faith in the market and bought, when others were in fear, made merry. But the return divergence was wide between the best in the diversified funds category and the worst.

Principal Emerging Bluechip was the top performer with a return of 201 per cent over the last one year.

The fund was launched in October 2008 – close to bottom of the market – and its performance was aided by sheer selection of stocks and sectors.

Others who shared the honours were Magnum Emerging Business with 193 per cent, Taurus Infrastructure and ICICI Pru Discovery with 185 per cent returns.

Among those who missed the rally were JM HI FI, Religare AGILE and HSBC Dynamic. They have let down their investors with a poor return of 45-60 per cent.

What clicked
The most common theme among the performers was that they all stayed invested during the market correction and they all had sizable exposure to mid-cap stocks.

All the “outliers” held cash less than 15 per cent of the total assets in March 2009, the period when the market was undergoing a turnaround.

They had well diversified portfolios. Most of them also invested in sectors that witnessed and indeed led a tremendously rally.

Principal Emerging Bluechip was overweight on banking, Magnum Emerging had invested 22 per cent of the assets in construction and projects, while Taurus Infrastructure was over weight on construction and power. ICICI Pru Discovery, the value fund, was overweight on banking and pharma.

Surprisingly they all have invested less in the software sector. The BSE IT index clocked 155 per cent over a one year period.

Laggards
JM HI FI was overweight on cement and invested 20 per cent of its assets there. HSBC Dynamic has invested in banks, consumer nondurables, pharma and software but what made the difference was that it had invested predominantly in large-cap stocks that rallied less than mid-caps .

Source: http://www.thehindubusinessline.com/2010/03/10/stories/2010031051631000.htm

Ask your wealth manager for money back

A few months ago, I said I wanted to be a mutual fund agent because it was a great life. I change my mind – I want to be a wealth manager instead. Mutual fund agents are limited to earning commissions on just mutual funds, and thanks to SEBI, those are now in the realm of sane amounts. Wealth managers on the other hand, have whole suite of commission eating opportunities – real estate funds, private equity funds, structured products, and if nothing else, the erstwhile ULIP, which was created for everyone except the end customer to make money. It really is a phenomenal life. You don’t really need to make any investment decision and if the client does lose money, you can conveniently blame the fund manager, because you never handled the money in the first place. You appear smart and sophisticated because you can apparently do “asset allocation” and “risk management”, people trust you because they think you know how to evaluate products, when in reality, you are pushing high commission products down people’s throats.

Do you know what the highest selling products in the wealth management market have been? ULIPS, for one, because distributors are earning as much as 50% of the premium in commissions, entirely upfront. Private equity funds are another market favourite. They can lock-in capital for 3 years, and pay the distributor a hefty 3-4% commission upfront. Why make 1% in trail on an equity mutual fund, when you can sell a client a more exotic product that pays you four times the fees, all upfront?

Even worse, individual investors don’t realize the curse of commissions, because there are no entry loads and wealth managers claim to be product neutral. The reality is murkier. Because a fund house has to pay a distributor commission, he has to charge you higher fees, so there is enough for everyone to eat. The reason equity funds in the US charge 0.75% to 1% while Indian funds charge 2% is not because Indian funds are adding twice the value – it’s because in India, a fund manager has to feed the distributor to survive. The total fee an equity mutual fund manager earns is around 2%, typically paid every quarter. Of this, even after the change in SEBI regulation, the fund house has to pay as much as 1.5% of the fee as commission to the distributor, most of it upfront. The fund manager, at the end, is left with a meagre 0.5%. Moreover, the fund manager is paying the distributor before he earns most of his fees, only to have the distributor convince the client to buy another fund in six months. Besides the atrocious principle that a distributor is earning more than the individual managing the money, the practice is driving fund managers bankrupt. No wonder most AMCs in India are unprofitable. Worse, it’s killing innovation in the investment market because a fund house’s only incentive is to create long lock-in products that can pay the highest commission – think ELSS or tax-saver schemes.



There is a solution to the problem, a drastic one, but one that investors should think about. Wealth manager should be happy with the advisory fees they are charging, and if they aren’t charging advisory fees, they should start charging them. They should then tell the customer exactly what commission they are earning from each product they are selling, and REFUND the whole commission back to the client. A client will see the commission wealth managers earn and the incentives they actually have, and a wealth manager will truly be product neutral. The customer will pay less investment management fees because he doesn’t have to bear the cost of the distributor, and will pay the wealth manager an advisory fee he deserves. The net results – clients will pay for the services they need and investment professionals for the value they actually add, not the bargaining power they have as middlemen. If a client doesn’t need advice they won’t pay for it, and if a wealth manager cannot give advice, he won’t get paid for it. Simple.

End clients are the only ones who can clean the asset management system of the corruption of commissions, ultimately for their own benefit. Maybe then I won’t see clients who have had wealth managers invest them in 95 different mutual funds (and this is not an exaggeration) or 70-year old retirees who have been sold private equity funds by their investment advisor. Maybe then, we will see a growth in what is right now a very small breed of wealth managers who refuse all commissions and are happy just giving advice. And maybe then, the fund managers of the world will design great investment products, rather than great commission generators.

The next time you talk to your wealth manager, tell him to show you a statement of exactly what commissions he has earned. There is enough competition in this market that you, the end client, can get with the question. And if your wealth manager doesn’t agree, find a wealth manager who will, because they exist. Pay the right fees and do all of us a favour – go, ask for cash back.

Source: http://www.moneycontrol.com/news/mf-experts/ask-your-wealth-manager-for-money-back_445632.html

MFs line up best global assets for investors

The desire among India’s well-heeled investors to look beyond local equity markets has domestic mutual funds rushing to offer products that reflect returns of overseas assets. In this financial year so far, asset management companies have launched five such schemes that route funds to overseas funds investing in Chinese shares to global real estate to commodities, as Indian investors seek to capitalise on assets that are not available in domestic markets.

Though the response to these schemes has been largely cold so far, domestic mutual funds — mostly with foreign parentage — plan to introduce more such schemes locally in the hope that the exclusivity of these products will lure Indian investors to test their fortune in them. A majority of investments of Indian investors in mutual fund schemes are in domestic equities and debt instruments.

“We want to launch a few other products that are not available in India and especially in the ones where our expertise has been proven globally,” said Ashu Suyash, MD and country head — India, Fidelity Investments, which recently launched its global real assets fund, which invests in a Luxembourg-incorporated global real asset securities fund that in turn puts money into global energy, materials and real estate assets among others.

Other such schemes, popularly known as feeder funds, launched this year include DSP BlackRock’s World Energy Fund, World Mining Fund, JP Morgan’s Greater China Fund and Mirae Asset’s China and Global Commodities funds. Benchmark Asset Management also recently launched India’s first international exchange traded fund that captures returns from Hang Seng. HSBC Mutual Fund has sought Sebi’s nod to introduce a scheme that invests in a Brazilian fund.

Industry officials said a large chunk of the investments in these funds is from relatively wealthy investors, mostly from metros.

“The fresh idea that these schemes bring is what attracts investors to them, as India is increasingly being linked to global market. Mutual funds are looking to capitalise on this curiosity factor,” said a top official with a private mutual fund.

According to Morningstar, assets of fund-of-funds that invest overseas stood at Rs 1,395 crore as on February 28, as against Rs 1,170 crore September-end. Mutual fund industry had assets worth about Rs 7.8 lakh crore as on February 28.

Wealth managers feel increased access to various commentaries about the outlook of asset classes has lured investors here to such funds.

“For Indian investors, it is the performance that matters rather than diverse asset allocation. That’s the reason why feeder funds that mirror commodity (including gold) and emerging market assets have been relatively popular,” said Ashish Kehair, head-products & strategy, global private clients, ICICI Securities.

Mr Kehair, however, added that the interest among investors is still far from satisfactory. This is because such schemes are yet to receive the status of an equity fund for favourable taxation purposes and there is lack of awareness about the prospects of these products.

Source: http://economictimes.indiatimes.com/markets/stocks/market-news/MFs-line-up-best-global-assets-for-investors/articleshow/5665048.cms

Mirae Asset appoints Gurpreet Singh as National Sales Head

Mirae Asset Global Investments (India) has appointed Gurpreet Singh as its National Sales Head.

Singh will be responsible for spearheading the sales and distribution function of the AMC for the mutual fund schemes portfolio spanning equity and fixed income products, a press release stated here today.

Prior to joining Mirae Asset, Singh was associated with ABN AMRO Bank and ICICI Prudential Asset Management Company in senior capacities, the release said.

"I am sure Gurpreet will play a pivotal role in our endeavor to establish a strong foothold for Mirae Asset Global Investments in the Indian Mutual Fund industry," Mirae Asset Global Investments (India), Chief Executive Officer, Arindam Ghosh, said.

Mirae Asset Global Investments (India) is a wholly-owned subsidiary of the Mirae Asset Financial Group.

Source: http://www.business-standard.com/india/news/mirae-asset-appoints-gurpreet-singh-as-national-sales-head/87852/on

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Aggrasive Portfolio

  • Principal Emerging Bluechip fund (Stock picker Fund) 11%
  • Reliance Growth Fund (Stock Picker Fund) 11%
  • IDFC Premier Equity Fund (Stock picker Fund) (STP) 11%
  • HDFC Equity Fund (Mid cap Fund) 11%
  • Birla Sun Life Front Line Equity Fund (Large Cap Fund) 10%
  • HDFC TOP 200 Fund (Large Cap Fund) 8%
  • Sundram BNP Paribas Select Midcap Fund (Midcap Fund) 8%
  • Fidelity Special Situation Fund (Stock picker Fund) 8%
  • Principal MIP Fund (15% Equity oriented) 10%
  • IDFC Savings Advantage Fund (Liquid Fund) 6%
  • Kotak Flexi Fund (Liquid Fund) 6%

Moderate Portfolio

  • HDFC TOP 200 Fund (Large Cap Fund) 11%
  • Principal Large Cap Fund (Largecap Equity Fund) 10%
  • Reliance Vision Fund (Large Cap Fund) 10%
  • IDFC Imperial Equity Fund (Large Cap Fund) 10%
  • Reliance Regular Saving Fund (Stock Picker Fund) 10%
  • Birla Sun Life Front Line Equity Fund (Large Cap Fund) 9%
  • HDFC Prudence Fund (Balance Fund) 9%
  • ICICI Prudential Dynamic Plan (Dynamic Fund) 9%
  • Principal MIP Fund (15% Equity oriented) 10%
  • IDFC Savings Advantage Fund (Liquid Fund) 6%
  • Kotak Flexi Fund (Liquid Fund) 6%

Conservative Portfolio

  • ICICI Prudential Index Fund (Index Fund) 16%
  • HDFC Prudence Fund (Balance Fund) 16%
  • Reliance Regular Savings Fund - Balanced Option (Balance Fund) 16%
  • Principal Monthly Income Plan (MIP Fund) 16%
  • HDFC TOP 200 Fund (Large Cap Fund) 8%
  • Principal Large Cap Fund (Largecap Equity Fund) 8%
  • JM Arbitrage Advantage Fund (Arbitrage Fund) 16%
  • IDFC Savings Advantage Fund (Liquid Fund) 14%

Best SIP Fund For 10 Years

  • IDFC Premier Equity Fund (Stock Picker Fund)
  • Principal Emerging Bluechip Fund (Stock Picker Fund)
  • Sundram BNP Paribas Select Midcap Fund (Midcap Fund)
  • JM Emerging Leader Fund (Multicap Fund)
  • Reliance Regular Saving Scheme (Equity Stock Picker)
  • Biral Mid cap Fund (Mid cap Fund)
  • Fidility Special Situation Fund (Stock Picker)
  • DSP Gold Fund (Equity oriented Gold Sector Fund)