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Recently, there were reports in Financial Chronicle and other Business papers that there were \"few takers for zero entry load option in Mutual fund Investment\". This was evident even before the introduction of the concept. There is huge list of funds and to choose one which is best suited to you, is not an easy task. Mutual Fund Advisors (also popularly called as Independent Financial Advisors) play a major role in this.
If investors go through these IFAs, it becomes easier for them in case they want any alteration or when they face any problem regarding dividends, etc. If the investors buy directly from fund houses, they need to approach each different Fund houses themselves, wasting nearly a day.
Even in developed nations, a major portion of funds are sold through the IFAs.
Many investors avoid going DIRECT becoz they do not want a Biased from the Fund house, but a Good unbiased advise which only a Qualified Mutual Fund Advisor can give.
Regards,
Srikanth Shankar Matrubai...
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Everything that goes up must come down. And if you want proof of this statement, you need look no further than the Sensex. After December 2007, it keeps inching upward only to once again fall flat on its face.
This roller-coaster ride of Sensex has probably given equity fund managers cardiac problems. In the first seven months of this year, diversified equity funds have turned in -36 per cent of return. Debt funds, the so-called safe haven for investors, have also turned in -0.36 per cent in June 2008. The last bastion of hope, Gold Exchange Traded Funds (ETFs), are also showing signs of weakness by turning in -3.33 per cent in July 2008.
The trick is in finding an asset class which at least offers some protection to erosion of capital. The only way out is to opt for an asset class whose returns are not linked to the stock market. This way the investors would be able to shield their capital from market turbulence.
Among all the 29 categories of funds classified at Value Research, there is a category called Hybrid Arbitrage funds. These actually follow a very simple and age old strategy of buying low from one market and selling high at another.
Buy Reliance at Rs. 500 on the !st of the month and simultaneaously sell Reliance Future at Rs. 510
Historically, traders used to buy goods from one country and sell them in another country at high prices. This is called arbitrage. The difference now is that matters have now become more sophisticated than before. Fund managers now take the help of computers to capture the arbitrage opportunities that may even exist for just a few seconds. These funds typically buy stocks in the spot market and sell the same, at the same time, in the futures market. In effect, they hedge their investments. At the time of delivery, they profit from the spread in the future-spot market. Moreover, corporate actions such as dividend declaration, buy-backs, mergers or de-mergers also provide arbitrage opportunities in the futures-options markets.
Arbitrage Funds
Returns (%)
Funds Assets (cr) 6 month 1 year 2 year
Benchmark Derivative 18.52 2.86 7.28 7.73
ICICI Pru Eq. & Deri. Income Opt. Ret 160.15 3.03 7.44 -
ICICI Prudential Blended Plan A 66.69 3.19 8.19 8.55
ICICI Prudential Blended Plan B 5.53 3.14 8.17 8.33
IDFC Arbitrage 67.27 2.63 6.89 -
JM Arbitrage Advantage 240.37 3.24 8.08 8.4
JM Equity & Derivative 13.78 2.77 7.16 7.13
Kotak Equity Arbitrage 162.37 2.88 7.65 8.13
Lotus India Arbitrage 44.92 3.33 8.22 -
SBI Arbitrage Opportunities 253.02 2.69 7.7 -
UTI SPrEAD 180.76 4.3 8.86 8.78
Sensex -18.66 -7.69 15.59
Crisil Liquid Fund Index 3.69 6.93 7.14
As on 31 July, 2008
The unique advantage of these funds is that though they buy stocks and futures in the equity markets, their strategy of simultaneous transactions in the spot and futures/options market make their returns neutral to the debt or equity market performance. The first arbitrage fund was launched just four years back by Benchmark. Currently, this category consists of just 14 funds. Though these funds are available for investment all the year through, its performance during this bear run has set them apart. This year, these funds have outperformed both the Sensex and the equity diversified category by 34 and 40 per cent respectively.
Arbitrage funds are ideal for risk averse investors who are absolutely averse to any depreciation in their capital. Moreover, these funds are more tax efficient than debt funds as they are treated in line with equity funds. In comparison to the all other variants of funds, arbitrage funds are the least volatile. The prime reason why investors are not drawn to these funds is because their returns are more or less in line with the debt funds. Hence for any investor the allocation to these funds would depend on their risk appetite. But ideally, it would always be prudent to allocate around 30 to 40 per cent of one's fixed income portfolio to arbitrage funds.
SELECT ARBITRAGE FUNDS
ICICI Prudential Blended Plan A
This best performing fund in this category in 2006 came very close to repeating that feat in 2007. In the last two quarters, it has delivered a return of 4.75 per cent. The financial services sector seems to be a favourite with the fund manager. One drawback of this fund is that it is not the most efficient in containing its cost.
JM Arbitrage Advantage
Overall the fund has been a solid performer by delivering above average return. Currently, this fund is betting big on the construction sector and has allocated around 8 per cent of its holdings to it. This may be due to the increased volatility, which this sector has seen in the recent months (as increased volatility creates more arbitrage opportunities).
A major concern is that its expenses are on a growing trend, an indication that the fund probably trades very heavily. While it is this very trading that tends to generate returns, the downside is that growing expenses eat into the returns.
Kotak Arbitrage Fund
Two factors stand out in favour of this fund. It has been a consistent player in this category and its expenses have always been on the lower side. In 2007, it turned in 9.06 per cent and was ranked third in this category. But by and large, the fund's return has rarely deviated from the category average. Average returns, consistency of performance and low returns are a plus for this fund.
UTI Spread
The sensation of 2008, it delivered 2.98 and 1.96 per cent in the last two quarters, respectively. If one were to look only at this category, the fund has been an outperformer. But even if we were to broaden the horizon and include all the other categories, this fund will continue to stand out with a commendable performance.
In the last six months, this fund has decreased its equity holdings substantially to 0.60 per cent (from 72 per cent in December 2007). If it continues to maintain its current equity-debt allocation, then it would lose its status as an equity fund and would subsequently not be as tax efficient.
...
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There were some announcements recently by the Life Insurance Council, a lobbying body formed by life insurance companies. Broadly, these announcements appeared to say two things: that the terminology of unit-linked insurance plans (Ulips) would be made uniform and that insurance companies would refuse to underwrite insurance-linked schemes issued by mutual fund companies.
Behind these announcements is the ongoing struggle between life insurance companies and mutual funds.
Mutual funds and life insurance are two distinct products, one intended as a savings vehicle and the other a safety net. However, this distinction has blurred over the last few years. Indeed, one gets a feeling the life insurance companies are also in the business of running mutual funds, categorised somewhat differently as unit-linked insurance plans (Ulips).
Ulips have a mix of characteristics of both insurance and mutual fund schemes.
Crucially, however, the mutual fund aspect of Ulips is regulated by the government under a very different set of rules compared with the real mutual funds.
From the investors’ point of view, the biggest difference between the two categories pertains to how much of his money is actually used for his insurance and his savings and how much is taken away to pay commissions to agents and towards the insurance company’s expenses. The second big difference is in the quality of the information he is given about his investments.
Mutual funds deduct less than 2.5% as the agent’s commission. And as per current norms, there is no deduction if investors don’t use an agent and go directly to a fund company.
In Ulips, on the other hand, the agent’s commission varies, but in the first year, it could be as high as 25% and more.
Next is the issue of transparency.
There is a vast difference between the meaning of net asset value (NAV) of Ulips and mutual funds.
In a mutual fund, the NAV announced is net of all expenses and charges the fund company deducts. If your investments were worth Rs 1 lakh when a fund’s NAV was Rs 22, then it will be worth Rs 2 lakh when the fund’s NAV is Rs 44. That’s it.
The arithmetic of insurance companies is different. NAVs of Ulips are effectively pre-deductions. The NAV may double, but your investments won’t double because the insurance company will reduce the number of units you hold to pay for expenses and commissions etc. This means the announced NAV has no clear and transparent relation to what the unit holders are actually earning.
However, Ulips have been the more successful of the two. News reports say that last year, a total of Rs 55,000 crore was invested (if invested is the right word) in Ulips. In the same period, around Rs 16,000 crore was invested in mutual funds.
We are often told by the insurance industry that this is because Ulips are a superior product. That’s complete rubbish. Ulips are successful because the ultra-high commissions and charges make insurance agents far more aggressive salesmen than those of any other financial products. These charges also enable insurance companies to spend far more on advertising, all from the unit holders’ money. The net result of high-pressure sales is that savings that would otherwise have ended up in mutual funds, bank FDs, PPF, post office deposits and many other asset types is ending up in Ulips, where a good proportion is diverted to pay commissions.
The direction India’s insurance industry has taken in the last few years amounts to regulatory failure. This industry was opened up to foreign capital and provided with a relatively lenient regulatory framework so that it could bring insurance to India’s under-insured masses. Instead, it has ended up focusing its energies (and capital) on selling expensive and opaque mutual funds dressed up as insurance.
It’s tragic that there is no move to even recognise that this problem exists. Indeed, even higher foreign ownership is on its way, supposedly because more capital is needed to Ulip the under-Uliped masses.
But, even the mutual funds don’t seem to be very interested in highlighting these issues, perhaps because many of them are part of financial conglomerates with flourishing insurance businesses.
It is therefore left to the investor to understand the issues and do what he thinks is in his best interest.
DNA................
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I would suggest you use ICICI direct website for Mutual fund transcations. They are providing the best services....
In reply to:
concealing facts by geojit.com
Posted by :
dr sundeep
I requested online for opening an account for buying online MF at www.geojit.com.i recived a call from them to open DMAT account for purchasing MF online they courieerd me papers.i send duly filled form and cheques,even then my mutual fund purchasing sectionn was not opened.i again called them then I was told to fill another form and send the cheque.I again completed the formalities.I was TOLD that all the MF houses are on there platform i can buy MF of my choice.After completing all these long formalities .I recieved the password But when I open the site to purchase the MF i found only 4 MF houses on there platform.this was unbelival that financial comanies can dothis much . 
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I requested online for opening an account for buying online MF at www.geojit.com.i recived a call from them to open DMAT account for purchasing MF online they courieerd me papers.i send duly filled form and cheques,even then my mutual fund purchasing sectionn was not opened.i again called them then I was told to fill another form and send the cheque.I again completed the formalities.I was TOLD that all the MF houses are on there platform i can buy MF of my choice.After completing all these long formalities .I recieved the password But when I open the site to purchase the MF i found only 4 MF houses on there platform.this was unbelival that financial comanies can dothis much ....
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\\`Don\\`t put pension fund in equity\\`
New Delhi, Sep 20 (PTI) In the light of financial mayhem in the US, CPI(M) today asked the government to abandon all moves to put pension funds into the stock market and discard the proposed legislation on pension sector.
The interim step announced last year that allowed upto 5 per cent of pension fund to be invested in the stock market should be done away with immediately, CPI(M) said in a statement.
It also said the PFRDA Bill (Pension Fund Regulatory and Development Authority), which enables investment of employees\\` pension funds into the stock market, be discarded.
The party demanded that the pension scheme of the government employees\\` should be reworked to ensure minimum guaranteed pension.
The pension funds of the employees, it said, must not be left to the mercy of the brokers which have played havoc in stock market.
The Finance Minister\\`s recent statements in the aftermath of the financial crisis in the US, reiterating the government\\`s commitment to carry forward financial sector reforms show a stubborn refusal to learn proper lessons, it said.
Earlier this week Finance Minister P Chidambaram had said he saw no reasons to halt financial reforms \\\\...
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MF\\\\\'s having greater than 65% equity exposure are exempt from DDT ...
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Dear Boarders
Just for the info of fellow boarders:
Sanjay Sinha, the CIO at SBI Mutual
Fund, has made a surprising move to DBS Chola Mutual Fund.
Investors would remember that Sinha replaced Sandip Sabharwal at the end of 2005, when Sabharwal moved from SBI Mutual Fund to Lotus Mutual Fund and then later to JM Mutual Fund, where he currently is CIO.
DBS Cholamandalam Asset Management Limited is undoubtedly getting very aggressive in its recruitment drive. It was just last week that Mohit Sachdev joined the AMC as Chief Marketing Officer. With 19 years of experience, he was earlier with UTI, as President, looking after the institutional business.
N Srinivasan, Director Finance on the Murugappa Corporate Board and Lead Director for the asset management business had recently remarked that the AMC had aggressive plans for growth.
Souce: VOL
Regds
Ashport
...
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Cheque payment seen as hurdle to expanding MFs' reach..................................NEW DELHI: The finance ministry soon proposes to make cheque payments and disclosure of personal account numbers (PAN) mandatory for the purchase of all financial products, but many warn this will go against the objective of expanding the reach of mutual funds.
"Payment by cheques and disclosure of PAN number for financial transactions is in line with what the finance minister said in this year's budget," said C.S. Mohapatra, the director for capital markets in the finance ministry.
"We propose to implement this soon," he told a seminar on the distribution of financial instruments here. However, experts said this would go against the larger objective of widening the reach of safe investment instruments.
"Cheques and PAN numbers are biggest hurdles to expanding the reach of mutual funds in rural areas," said A.P. Kurien, chairman of the Association of Mutual Funds in India (AMFI).
"The policy is contradictory. This requirement will be inimical to ensuring financial inclusion of people in rural areas. Insurance products do not have these requirements. That's why such products have a good market in the hinterland," Kurien told media.
"The fear of permanent account numbers has virtually disappeared," Finance Minister P Chidambaram said in his budget speech Feb 29. "I propose to extend the requirement of PAN to all transactions in the financial market, subject, however, to suitable threshold exemption limits."
Kurien said most rural people did not know what PAN was. "Some think it is 'paan, you know, the popular betel leaf you munch on."
"This is certainly a contradictory stance as you cannot have more financial inclusion if people in rural areas have to to get PAN cards," S K Dhingra, managing director of the New Delhi-based SMP Investment Advisers, told IANS.
Young independent financial adviser Bharat Bhushan, who heads the Delhi-based financial products distributors Money Options Services, however, felt it may not be such a problem if PAN was made mandatory.
"Even rural people get ration cards. So they will get PAN cards too. Distributors themselves could offer to get the PAN cards made as part of the services they offer," he said."
Rajesh Jain, who runs a portfolio investment firm in Rohtak town of Haryana, also said the PAN requirement is certainly a big barrier, adding that he knew the rural market well and he was speaking with some experience.
Mohapatra himself quoted a McKinsey report and said some 85 percent of Indians had never heard of demat accounts, which invited a query from experts like Jain: "Have they heard of PAN cards either?"
ET....................................
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Dear vishalkhapane
Further investing in JM Basic Fund all dependes upon ur risk appetite. It is a high risk high return type of fund. So if u are comfortable with that u can certainly invest but there will be more bumpy rides ahead.Albeit it has got 5 star rating recently by valueresearch it is due to its stellar performance in the last bull run.
And one more thing any investment should be in line with ur current portfolio. Just dont go by cost averaging in one particular fund.
happy investing
Regds
Ashport
...
In reply to:
Advice on JM Basic (G)
Posted by : vishalkhapane
Hi,
I have invested 20k at NAV of 33. now the fund NAV has slipped to 20.
Should I purchase more and average the cost?
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Hi,
I have invested 20k at NAV of 33. now the fund NAV has slipped to 20.
Should I purchase more and average the cost?
...
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Are FMPs A Ticking Time Bomb? Watch Out
FMPs are walking the tightrope by taking undue risk in order to beat competition
Kayezad E. Adajania
Mutual funds (MF), taking advantage of rising interest rates, have been launching fixed maturity plans (FMPs) almost every week to attract investors. FMPs are closed-end debt funds that aim to protect the downside. But, to beat competitors, some FMPs are taking undue risks. Market sources told Outlook Money that one FMP launched by a large public-sector MF recently got into trouble with one of its underlying instruments. The company in whose debt paper this FMP had invested in, defaulted on the principal payment. Eventually, the MF’s parent company—one of India’s biggest financial houses—had to bail out the fund.
Beware of credit risk. Credit risk denotes the quality of your scheme’s underlying instruments and their ability to repay the interest and principal amounts. Whenever your FMP invests its corpus in debt papers of various companies, it hopes that when the tenures end, it gets the money back and pays them back to you—the investor.
But what happens if one of these companies defaults? There’s a good chance that your FMP might also default and you may not get the yield that was indicated to you at the time of investment. Typically, FMPs roll over such debts into a forthcoming FMP and, in the interim, borrow money to repay existing unitholders.
Here’s how a typical FMP works. Companies borrow money from banks and financial institutions to meet their day-to-day needs. They also borrow from MFs by regularly issuing debt instruments such as certificates of deposit or commercial papers. These MFs then invest their funds—that they collect through FMPs—in such papers and stay invested in them till maturity. The higher the scrip’s credit rating, the lower the yield it fetches the FMP, and vice-versa.
When these scrips mature, the companies repay the MFs that, in turn, redeem the FMPs. If, however, a company is unable to repay the loan, this particular scrip is rolled over to another FMP that the MF would have just launched, or will launch soon. In other words, this scrip would then start to appear in the portfolio of the second FMP. The MF, meanwhile, borrows the shortfall from the market and ensures that the first FMP’s redemption doesn’t take a hit.
Bitter truth. Many FMPs have taken high exposures to the real estate sector. The slump in this sector has resulted in many companies defaulting and, thus, landing MFs in a repayment soup. The MF—about whom the market is abuzz with rumours—denied the problem. The reality is many FMPs, including this one, have taken additional risks to offer that extra bit of return.
For example, as per the LIC MF’s March 2008-end portfolio published in the newspapers, many of its FMPs have exposures to the real estate and construction sectors. LIC MF FMP Series 35 had invested a whopping 86 per cent in just the construction sector. What’s more, 37.7 per cent of its corpus was invested in assets whose credit rating was below AA—OLM’s threshold of safe investments. This is just one example. There are several FMPs in the market that invest in low-rated scrips and put themselves and your money at risk. The problem is compounded as most of these FMPs disclose their portfolios only twice a year—the minimum mandate by the Securities and Exchange Board of India.
What should you do? Don’t get swayed by higher indicative yields. Apart from these being just indicative—and not a guarantee—higher the yield, higher is the amount of risk your FMP could be taking to earn that yield.
Also, look at your MF’s pedigree. “It’s always better to sacrifice a little bit of return if you are offered a quality portfolio,” says Santosh Kamat, CIO (fixed income), Franklin Templeton MF. FMPs are low-risk instruments and capital protection is important.
Although most MFs disclose portfolios of all their schemes every month, they stick to the bare minimum when it comes to FMPs. This is woefully inadequate as MFs have already shown their capability for frequent disclosures. If FMPs disclose their portfolios every month, it would give an idea to the investor about the credit quality that the MF is used to taking. Also, FMPs must mention in their offer documents the lowest bar in terms of credit quality they are willing to take.
source:outlook money
v.krishnamoorthy
...
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Dear Guest,
For Medium to High Risk Invest 1000 P.M. Each in Following Equity Funds:
Birla Sunlife Frontline Equity Fund
DSPML Equity Fund / DSPML Balance Fund
DWS Alppha Equity Fund
HDFC Growth Fund.
For Low to Medium Risk Invest in Following
UTI Mahila UNIT Scheme( GENTS Allowed to Invest)
Low Risk with High Liquidity Invest Rs.2000 P.M. in Following Arbitrage Funds ( Expected TAX Free Returns of 8-9 % Per year if Redeemed after 1 year.
HDFC Arbitrage Opportunity Fund
SBI Arbitrage Opportunity Fund
UTI SpREAD Fund
P.C.Sharma...
In reply to:
Advice on JM Basic (G)
Posted by : vishalkhapane
Hi,
I have invested 20k at NAV of 33. now the fund NAV has slipped to 20.
Should I purchase more and average the cost?
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