Cash demand for Dussera and government bond auctions could deepen liquidity crunch this week unless the government and the Reserve Bank of India (RBI) step in. And while banks have cut lending, mutual funds (MFs) are trying to figure out who they could turn to if investors pull out their money in large quantities.

Amid tight liquidity, MFs feel that, like banks, if they are allowed to access overnight funds from RBI, it would be easier for them to meet sudden redemption pressures. Fund houses, which discussed the possibility among themselves, also met one of the RBI deputy governors recently to appraise the central bank of the situation.

Withdrawal of money by banks from liquid and liquid plus schemes of mutual funds has led to the erosion in the average assets under management (AUM) of some funds, indicates early data from the Association of Mutual funds of India (Amfi).

According to the data, fund houses such as Reliance mutual fund (Rs 86,494.45 crore), AIG mutual fund (Rs 3,025.68 crore), JP Morgan mutual fund (Rs 2,400 crore), Lotus India (Rs 7,937.06 crore), Mirae Asset (Rs 2,309. 82 crore) and SBI mutual fund (Rs 29,248 crore) have seen a fall in their average AUMs even as bank money went out of liquid funds because of severe liquidity crunch in the market. Banks often park surplus funds in liquid or liquid plus schemes to earn extra return and yet retain liquidity of their funds.
Real estate MFs to have 2 independent valuers : AMFI Chief

Real Estate Mutual Funds which are expected to be introduced this year will have two independent valuers, Chairman, Association of Mutual Funds in India (AMFI), A P Kurian, said.

"About two to three funds are ready with their products and are likely to launch during the course of this year. The guidelines mandate that there should be two independent valuers," Kurian said.

The valuers would look at whether the mutual fund has invested at the correct price.

"It is to protect the interest of the investors and to ensure fairness in valuations," Kurian said.

Real estate funds would provide an opportunity to the common investor to participate in real estate markets, he said.

A minimum of 35 per cent should be invested in real estate projects, while the rest could be invested in mortgage- back securities, shares of real estate companies, debentures issued by such companies, etc, he added.

Speaking on the capital market, he said that the declining Sensex was influenced by global sentiments like rising oil and commodity prices, amongst others.

"Seeing the strength of the economy and the market in India, I think it is only a short-time fall and would definitely recover over a period of time," he said.

Source: Economic Times
To cash in on the bullish growth of entertainment and media (E&M) industry in the country, financial institutions are rolling out a slew of mutual funds focusing on these spaces.

According to a report by PricewaterhouseCoopers and Federation of Indian Chambers of Commerce and Industry (FICCI) the E&M industry recorded a growth of 17% over the previous year, against the projection of 15%.

Equity majors like Blackstone, Temasek, Warburg Pincus, Goldman Sachs, T Rowe Price, Lehman, DE Shaw are key investors in the sector.

“Given this growth, it may be the right time for such funds. Many of these funds cover a wide range of areas within the entertainment arena such as retail, shopping malls, mobile content providers lifestyle beyond the conventional media like television, film, print advertising and multiplex,’’ said Jaideep Ghosh, director, KPMG Advisory Services.

Asset management companies (AMCs) do have thematic funds focusing on select sectors. Mutual funds on entertainment industry are relatively new to India. Sundaram BNP Paribas Mutual and Reliance Mutual Fund have launched funds that are focused on entertainment and media industry.

Religare with Vistaar Entertainment Ventures recently has launched, a film fund aimed at financing films in the country and overseas. In the first round it will have a corpus of Rs 200 crore. Pyramid Saimira is also said to be launching a similar fund in the country.

“We’re seeing emergence of new kinds of businesses and entertainment. Funds like this will ensure people’s participation in the growth story and provide them an opportunity to invest in funds rather than direct investment in equities,’’ said Sunil Subramaniam, executive director (sales & marketing) of Sundaram BNP Paribas Mutual.

Wealth managers feel investing in these sectors can result in high growth if invested long term. "It can be pretty volatile as the industry is not mature. So long term investment is suggested in these spaces," said Anil Rego, CEO of Right Horizons.

Significant investments are expected in E&M sector from domestic and overseas players. Global media giants like Viacom, Walt Disney, BBC, J C Decaux and Astro are already in the country or looking at it. The industry has already witnessed deals such as Walt Disney-UTV, Blackstone-Eenadu and Adlabs-ADAG (Anil Dhirubhai Ambani Group).

The number of mutual funds are on the rise here. Currently, there are 34 players in the industry, while the number is expected to cross 50 in the next couple of years. The country’s mutual fund sector is expected to grow at a CAGR of 30% for the next 10 years.

Courtesy :: Economic times
Worst quarter in the decade for equity

Only gold ETFs have ended positive and attracted investors' wealth.

On March 31, 2008, Indian mutual funds ended their worst quarter of the decade. The average returns of almost all categories of equity funds had their worst three months since January 2001, according to the quarterly review of fund performance released by Value Research.

Funds in the key ‘Diversified Equity’ category, which has the largest number of funds (194) as well as the highest investor interest, lost an average of 28.3 per cent. This was far worse than the previous worst of the decade, when these funds lost 16.9 per cent in Q1 of 2001.

Individual funds in the category lost between 16.2 per cent and 40.6 per cent between January and March this year, during which BSE Sensex and the NSE Nifty both lost 22.9 per cent.

While equity funds registered staggering losses on an absolute basis, they did substantially worse than their benchmark indices too. Of the 277 equity funds (which includes diversified equity as well as other categories) that were part of this study, only 35 outperformed their benchmarks while 242 failed to do so.

What’s worse, of the 35 which beat the benchmark, a mere seven managed to do so by a margin greater than five per cent. At the other end of the scale, as many as 142 funds underperformed their benchmarks by more than five per cent.

Funds in the ‘diversified equity’ category gained an average of 21.4 per cent over the four quarters, with individual schemes’ returns ranging from a gain of 53.7 per cent to a loss of 7.9 per cent.

While equity funds are in deep strife, the normally staid world of debt funds is also giving investors sleepless nights. Even though debt fund numbers for the entire quarter look almost normal, the month of March has come as a shock.

Worsening inflation numbers and the uncertainty on the interest rates have seen the average returns of funds in the Gilt (Medium & Long-term) category lose 1.1 per cent during March.

Even short-term gilt funds, which are supposed to be insulated from interest rate shocks have had a poor month in which they gained just 0.1 per cent with six of the 18 funds in the category making losses.

The only fund category whose investors were cheering was Gold ETFs, which invest directly in gold. These funds were up 13 per cent for the quarter. Although their gains would have been higher, they lost 3.2 per cent in March.

Gold has never been without its share of admirers, from The Gold Exchange Traded Fund (ETF) category generated a 1-year (as on April 2, 2008) return of 22 per cent. That too at a time when the global equity market is in the doldrums.

Gold Benchmark Exchange Traded Fund — launched in February 2007 and the veteran in this category — delivered a 22 per cent return over the past one year. UTI Gold Exchange Traded Fund, launched a month later, gave 1-year return of 27 per cent.

Mutual Fund Category

Percentage Returns

1 Year* 1 Quarter**
Gold ETF 27.90 13.00
Debt: Short-term 9.00 1.90
Debt: Ultra Short-term 7.50 1.90
Gilt: Short-term 6.20 1.30
Gilt: Medium & Long-term 7.10 1.20
Debt: Medium-term 7.50 1.10
Hybrid: Monthly Income 9.40 -3.70
Hybrid: Debt-oriented 10.50 -7.10
Equity: FMCG 16.50 -16.70
Equity: Pharma -1.90 -18.90
Hybrid: Equity-oriented 16.80 -19.80
Equity: Auto -8.80 -25.70
Equity: Banking 33.10 -26.20
Equity: Technology -19.30 -26.40
Equity: Diversified 21.40 -28.30
Equity: Tax Planning 21.70 -28.80
Apr 1, 2007 - Mar 31, 2008 ** Jan 1, 2008 - Mar 31, 2008

In the first quarter of the calendar year 2008, which has been the worst quarter for equity funds in a decade, UTI Gold Exchange Traded Fund, Gold Benchmark Exchange Traded Fund, Kotak Gold Exchange Traded Fund and Reliance Gold Exchange Traded Fund offered a cool 13.04 per cent to its investors.

Naturally the rising prices of the yellow commodity over the last few months have led the gold ETFs post smarter returns. Gold prices internationally have moved from $650 an ounce in June last year to $900 an ounce, after touching $1,000!

The corpus of Gold Benchmark Exchange Traded Fund increased from Rs 120 crore (June 2007) to Rs 161 crore (March 2008). Net assets for UTI Gold Exchange Traded Fund also increased from Rs 135 crore to Rs 161 during the same time period.

DSPML World Gold fund, which listed in September 2007, delivered 42 per cent since launch. The FTSE Gold Mines (CAP) index gave 11 per cent during the same period.

This year (till April 02, 2008), the fund, which is part of the Equity Specialty category has delivered around 5.5 per cent compared to the category’s 18 per cent loss during the same period.

The fund’s good returns can be attributed more to the fact that the gold prices have peaked to a 30-year high, resulting in a bonanza for the companies in this field. Not surprisingly, many investors have flocked to this fund.

Funds Mar-08 Jan-08
Reliance Growth Rs 740.31 crore 998.01 crore
Reliance Equity Rs 537.71 crore 540.35 crore
Tata Infrastructure Rs 385.17 crore Rs 373 crore
DSPML T.I.G.E.R. Rs 373.52 crore Rs 13.68 crore
Reliance Vision Rs 297.51 crore

ICICI Prudential Dynamic Rs 284.76 crore Rs 106.33 crore
Franklin India Flexi Cap Rs 235.76 crore Rs 91 crore

The fund’s assets under management, which stood at Rs 692 crore in September 2007, have almost tripled to over Rs 1,600 crore in March 2007. A weakening US dollar and an unprecedented rise in oil prices have also made gold an attractive investment avenue.

Once overweight on equities and neutral on cash, mutual funds seem to have reversed that position. Welcome to the new world of cash stash!

A look at the equity portfolios of March 2008 reveals that funds are on a strict liquid diet. As on March 31, Sundaram BNP Paribas Capex had 30 per cent of its assets in cash, followed by LICMF Growth with 29.47 per cent.

The cash position of these two schemes during the peak of bull run (January 2008) was 9 per cent for LICMF Growth and 7 per cent for that of Sundaram BNP Paribas Capex.

As on March 2008, diversified equity funds were sitting on a cash pile of Rs 7,859 crore, as against Rs 4,773 crore in January 2008. A total of 108 funds increased their cash allocation expressed as percentage of net assets, while 33 saw a decline.

All in all, cash available with the fund houses in March increased to Rs 7,859 crore (8.64 per cent of the total assets) from Rs 4,773 crore in January (4.46 per cent of total assets).

While sitting on cash protects the investor from a sharp downfall, it also implies that you miss out on sudden upward spurt; a phenomenon which has now become a part and parcel of Indian equity markets.

* We are only referring to the cash positions of diversified equity funds.

Courtesy :: Business Standard
MF industry saw Rs 39K cr loss in March

One saw the carnage across the markets; also in the month of March, the Assets under Management or AUMs for most mutual funds have taken a bit of a tumble.

The mutual fund asset industry has shrunk considerably, seeing a Rs 39000 crore loss in March; currently stands at about Rs 5.27 lakh crore.

Assets Under Mgmt (Rs Cr)

March 5,52,705

February 5,65,100

Some of the MF industry toppers are:

Mar '08 AUM (Rs Cr) MoM Change-fall (%)

Reliance MF 90,938 -2.77

ICICI Pru MF 54,322 -8.36

UTI MF 48,983 -6.63

HDFC MF 44,773 -3.28

Birla SunLife 35,906 -3.46

SBI MF 29,179 -1.06

F'lin Temp MF 26,842 -10.2

While the Sensex and Nifty lost about 9-11% in March, mutual fund assets have fallen only 6.62% (MoM).

Understanding why, the mark-to-market (MTM) losses of Rs 25,000 crore, clubbed with liquid funds redemption of about Rs 20000 crore - it was supported by Fixed Maturity Plans (FMPs), which achieved huge inflows of Rs 15000-20000 crore, mainly because they offer double indexation benefit.

So lot of investors invest in FMPs in March. So that is the reason why mutual funds assets have got a lot of support in March.

Courtesy ::