Mutual Fund Newsletter – March 24 to 28, 2014

Mutual fund houses will now have to give a reasoning while they cast their votes on resolutions by their investee companies.

March 29, 2014 12:56 IST | India Infoline News Service
Top Stories

SEBI issues strict disclosure norms for MF houses
In order to enhance transparency and increase the quality of the disclosures for investors, mutual fund houses should disclose the Assets Under Management (AUM) on monthly basis on their website and also share the same with Association of Mutual Funds in India (AMFI). This would include monthly disclosure of AUM from different categories of schemes, AUM from places beyond top-15 cities, contribution of sponsor and its associates in AUM, contribution from different types of investors (retail, corporate, etc), state-wise contribution and AUM from sponsor group or non-sponsor group distributors... Read more

SEBI asks MF houses to provide voting rationale
Mutual fund houses will now have to give a reasoning while they cast their votes on resolutions by their investee companies. “AMCs shall be required to record and disclose specific rationale supporting their voting decision (for, against or abstain) with respect to each vote proposal,” SEBI said in a circular on Monday. AMCs shall additionally be required to publish summary of the votes cast across all its investee company and its break-up in terms of total number of votes cast in favor, against or abstained from, it added... Read more

Over 86% investors satisfied with MF schemes: FIAI
Over 86% of investors in the country are satisfied with their mutual fund schemes, a survey by Financial Intermediaries Association of India (FIAI) said. The survey said, over 60% of the mutual fund investors were happy with services of distributors and advisers of investment schemes, while the remaining indicated the low satisfaction with their fund investments, the survey said. According to the survey, most investors would like to see regulatory intervention with respect to better selling practices and transparency of the schemes as well as investor grievance handling.
The survey targeting mutual fund investors was conducted across the country and covered all segments of individual clients - retail as well as HNI - across all age groups.

Domestic News

Fund mangers invest heavily in banking stocks in Feb
Mutual fund managers are betting big on IT stocks. They have increased their exposure to the software companies stocks to a record high of Rs. 28,784 crore in February, according to data from the Securities & Exchange Board of India (SEBI). At the end of February, mutual fund investments in software stocks stood at 15.2% of their total equity assets under management of Rs 1.89 trillion, SEBI added. Mutual funds invested Rs. 27,772 crore in software companies in January.

Mutual funds had an exposure of 17.08% to bank stocks in February, the highest among all sectors. Fund managers bought shares worth Rs 32,225 crore in the banking sector. A mutual fund is a vehicle made up of a pool of funds collected from investors that buys and sells securities such as stocks, bonds and money market instruments.

SEBI allows 100 entities to set up AIFs in India
Market regulator SEBI (Securities and Exchange Board of India) has allowed over 100 companies to set up Alternative Investment Funds (AIFs) in around two years, according to a media report. AIFs are the newly created class of pooled-in investment vehicles for real estate, private equity and hedge funds. The 100 AIFs have been registered with Sebi in 2012, while 67 in 2013 and 22 in 2011. Around 11 companies got SEBI's approval to operate in India so far this year. Under SEBI guidelines, AIFs can operate broadly in three categories. The Sebi rules apply to all AIFs, including those operating as private equity funds, real estate funds and hedge funds, among others... Read more

SEBI to notify rules to regulate research analysts soon
Market regulator SEBI (Securities and Exchange Board of India) is in the final stages of notifying new rules to regulate research analysts, according to a media report. At present, SEBI is analysing the comments submitted by the public and other stakeholders on its consultation paper and draft 'Research Analyst Regulations', the report added. Final norms would be issued soon after taking into account the entire consultation process, the report further said. In November 2013, SEBI proposed new norms to regulate research analysts while clamping down on research services offered by foreign entities without getting registered in India. It had asked general public to give suggestions on the same by December 21, 2013.

Morningstar India announces winners of 2014 Fund Awards
Morningstar India, a subsidiary of independent investment research provider Morningstar, Inc, on Thursday announced the winners of its 2014 India Fund Awards. The Morningstar India Fund Awards recognise funds and fund houses that added the most value for investors within the context of a relevant peer group in the past year and over longer time periods. Morningstar names eight fund category winners and three fund house winners by applying a quantitative methodology, with a qualitative overlay, which emphasizes one-year performance but also considers the three- and five-year performance history of all eligible funds. The company adjusted returns for risk using a proprietary screen that imposes a higher penalty for downside variation in a fund’s return than upside volatility... Read more

International News

Shares of Schultze Offshore Fund listed on ISE
Schultze Asset Management, LLC announced the listing of Class L shares of Schultze Offshore Fund, Ltd on the Irish Stock Exchange. SOF is SAM’s flagship vehicle’s offshore feeder. The ISE listing is expected to bring a wide variety of benefits for certain investors including: (a) enabling a broader range of investors by making it an eligible investment, (b) reducing regulatory constraints for investors in some countries, (c) generally increasing the credibility and profile of the entity, (d) enhancing transparency, and (e) tax considerations. The ISE has been in existence for over 200 years and is recognized worldwide as a leading center for listing investment funds with over 3,000 funds and sub-funds listed... Read more

Global high-yield bonds gain popularity in Thailand
As a product that is barely a year old, Accredited Investors High Yield Bond (AI HYB) funds are still in the process of gaining acceptance among investors in Thailand. At present, these funds can only be sold to institutions and high-net-worth individuals, feeding their appetite for risk. The funds have also gained traction due to their short durations and exposure to global bond fund themes. The next step could be to widen the customer base to include retail investors. "With enough acknowledgement and acceptance from the public, the ideal development in the next stage is for AI HYB funds to be allowed for mass retail purchase," says Alec Ng, an analyst with Cerulli... Read more

Equity funds estimate outflows of $968mn for latest week
Total estimated inflows from long-term mutual funds were $3.43 billion for the week ended Wednesday, March 19, 2014, the Investment Company Institute reported. Equity funds had estimated outflows of $968 million for the week, compared to estimated inflows of $4.22 billion in the previous week. Domestic equity funds had estimated outflows of $3.81 billion, while estimated inflows to world equity funds were $2.84 billion. Hybrid funds, which can invest in stocks and fixed income securities, had estimated inflows of $1.82 billion for the week, compared to estimated inflows of $1.94 billion in the previous week... Read more

Equity funds report inflow of $19.39bn in Feb: ICI
The combined assets of the nation’s mutual funds increased by $429.2 billion, or 2.9 percent, to $15.23 trillion in February, according to the Investment Company Institute’s official survey of the mutual fund industry. In the survey, mutual fund companies report actual assets, sales, and redemptions to ICI. Equity funds posted an inflow of $19.39 billion in February, compared with an inflow of $23.90 billion in January. Among equity funds, world equity funds (U.S. funds that invest primarily overseas) posted an inflow of $9.74 billion in February, versus an inflow of $16.90 billion in January. Funds that invest primarily in the United States had an inflow of $9.65 billion in February, versus an inflow of $7.00 billion in January... Read more

Alternative asset managers investing in peer-to-peer loan market
In the March 2014 issue of The Cerulli Edge - US Monthly Product Trends, Cerulli examines alternative investments. The March Monthly Spotlight features liquid alternatives in '40-Act funds.
Alternative asset managers that have expertise in high-yield fixed income and distressed assets are investing in the peer-to-peer loan market, such as Colchis Capital and Direct Lending Investments. These firms manage hedge funds that buy peer-to-peer loans from a number of providers and create a diversified pool of loans. Many of these peer-to-peer platforms have received funding from top private investment firms... Read more


Should Indian Fund Managers disclose ownership?
Few would dispute the importance of a fund manager when it comes to mutual fund investments. Here is an individual who is entrusted with the responsibility of managing investors’ monies. Sure, one expects him to have support in the form of an analyst team and an investment process to guide him. But when it comes to making investment decisions, he is often the first among equals.

So what factors do investors look at while evaluating the fund manager? The track record i.e. performance of funds managed by him across market conditions and time frames. Stability is always a positive. Fund managers with a reputation of frequent job changes are frowned upon. A frequent change in fund managers can hamper the fund’s performance and in turn spell trouble for investors. Fund manager communication (although a bit uncommon in the Indian context – more on that in a subsequent article) can also offer insights into his thought process and investment style... Read more

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