Tag: mutual fund news

Should you invest in the ‘new’ international mutual funds?, BFSI News, ET BFSI

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The mutual fund houses are busy launching ‘exotic’ international funds. Nippon India Taiwan Equity Fund is the first Indian mutual fund to invest in Taiwanese market. Mirae Asset Hang Seng Tech ETF will focus on IT sector companies listed on the Hong Kong stock exchange. Motilal Oswal MSCI EAFE Top 100 Select Index Fund gives investors a chance to diversify across European markets. PGIM India Global Select Real Estate Securities Fund primarily invests in REITs and equity and equity related securities of real estate companies located throughout the world.

Most international funds in the country invest in US and UK. The new funds, at first glance, offers Indian investors a chance to diversify and invest in emerging markets and European markets. But does a regular investor need such exotic funds?

“Different markets have different risk and return profiles and offer opportunities which may not be available for investors in our domestic market,” says Siddharth Srivastava, Head, Products – ETF, Mirae Asset Management India. He explains further that there are two reasons behind investing in foreign markets. “First, Investors want to take a broad market exposure to a single country or a group of countries representing a region or a category. Secondly, Investors are now getting increasingly aware about various emerging and disruptive technologies and other themes and their future potential. They want to invest in portfolio’s which provides access to companies catering to such domains,” says Siddharth Srivastava.

A look at the international fund category will tell you that the basket has various different schemes. There are funds investing in USA to Chinese markets. Or they might be investing in commodities or tech or gold. Investors need to be cautious of the kind of schemes they are picking. Mutual fund managers say that the new age technology and the changing global scenario has led to the launch of different types of new global funds.

“Domains like FinTech, E commerce, Cloud, AI, Electric and Autonomous Vehicles, IoT, etc are gaining traction. While we have seen run-ups in several companies involved in above themes, still from a long-term point of view, they may provide significant potential for growth,” says Siddharth Srivastava.

Mutual fund planners and advisors say that the trends in global markets lead to the launch of new schemes. Retail investors need to add these funds to their portfolio only if their investment strategy aligns with these themes.

“Most of the international funds that are available at present for investors are US-based funds, hence the new funds do allow diversifying across different geographies and at the same time invest in companies of different sectors as well,” says Harshad Chetanwala, Founder, MyWealthGrowth, a wealth management firm, based in Mumbai. However, he says retail investors can consider having allocation up to 10% depending on their appetite and current portfolio.

“Within the international portfolio, investors can split between US and Non-US based funds. However, the first objective of investors should be to build a strong India based portfolio and then diversify in international funds. Invest in specific international funds only when you understand that market and its functioning or take help from a planner.” says Harshad Chetanwala.

The opportunities in the global market come with its own set of risks and potential rewards. While the correlation may reduce the risk of the overall portfolio, on the standalone basis, the product may be risky and may only suit investors with a high risk appetite. The investor gets additionally exposed to the regulatory, geo-political, currency risk among others. Investors must always remember this before investing.



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ITI Mutual Fund launches banking and financial services fund, BFSI News, ET BFSI

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ITI Mutual Fund has announced the launch of ‘ITI Banking and Financial Services Fund’. The NFO will be available for subscription till November 29. Minimum application amount is Rs 5,000 and in multiples of Rs. 1 thereafter. The fund will be jointly managed by Pradeep Gokhale and Pratibh Agarwal. This is the 15th fund launched by the AMC in two years of its existence.

The fund will invest in banking and financial services which will include banks, insurance companies, rating agencies and new fintechs that are emerging among others.

“Banking and Financial Services are well regulated in India and have witnessed uninterrupted growth over the last few years. The fund house is confident of offering a unique investment experience to its investors by adopting a diligent and research-backed investment process. The fund house follows the investment philosophy of SQL – Margin of Safety, Quality of the business and Low Leverage, and offers a superior investment experience to its investors,” said George Heber Joseph, Chief Executive Officer and Chief Investment Officer, ITI Mutual Fund.

According to the press release, the current AUM of the fund house is Rs 2,239 crore as on 31st October, 2021. Out of the total AUM, equity AUM accounted for Rs 1,588 crore while hybrid and debt schemes accounted for Rs 319 crore and Rs 333 crore respectively.



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IIFL Asset Management launches IIFL Quant Fund, BFSI News, ET BFSI

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IIFL Asset Management has announced the launch of IIFL Quant Fund. This fund is an actively-reviewed, quantitative rule-based fund. The New Fund Offer (NFO) opened on 8 November and closes on 22 November. The fund will be managed by Parijat Garg and it will be benchmarked against S&P BSE 200 TRI.

According to the press release, the fund aims to invest in stocks that show growth or defensive characteristics. The IIFL Quant Fund will have periodic rebalancing and review. The investment objective of the fund is to generate long term capital appreciation for investors from a portfolio of equity and equity-related securities based on Quant theme. Quality stocks will be screened, based on quantitative portfolio construction methods and techniques.

The fund house also says that as this fund is based on quantitative rules, it is mainly driven by investment process over discretion, thereby avoiding market cap and behavioural biases. Further, the methodology and portfolio construction of the fund are back-tested across time periods and validated.

“The Passive+ approach that the fund follows is based on multiple quantitative factors that have been back-tested and historically proven to improve stock selection capabilities. The model has a fundamental basis with parameters clearly laid out and relies on a defined process while applying the same across a set of comparable stocks,” says Manoj Shenoy, CEO, IIFL AMC.

“Based on a quantitative model, the strategies of the IIFL Quant Fund are fully systematic and rule-based and would have additional filters for selecting quality momentum stocks. The fund universe will include the Top 200 stocks by market cap and liquidity,” says Parijat Garg, Fund Manager, IIFL AMC.



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Surplus liquidity, firm demand of MF drive down yields on CPs

Banking & Finance

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Demand from fund houses also increased because the investment made by them in CPs have matured in the past few days.

By Manish M. Suvarna

The yields on commercial papers (CP) maturing in three months have eased nearly 10 basis points in the last few weeks owing to huge surplus liquidity in the banking system and improved demand from mutual funds. Similarly, yields on the 91-day T-bill also moderated 10 basis points in August.

As of September 7, yields on CPs issued by non-banking finance companies (NBFC) maturing in three months were hovering between 3.50% and 3.65%, and those on papers issued by manufacturing companies were trading between 3.35% and 3.50%. This is lower than 3.65-70% and 3.40-55% yields traded on papers issued by NBFC and manufacturing companies, respectively, in mid-August. The 91-day T-bill cut-off was at 3.3892% on August 11 and 3.2856% on September 1.

“RBI’s bond and foreign exchange purchases continue to add to the unprecedented level of liquidity surplus, which has increased from about Rs 7 trillion at start of the fiscal to over Rs 11 trillion now. This is exerting downward pressure on the money market and short-end bond yields,” said Pankaj Pathak, fund manager for fixed income at Quantum Asset Management.

The liquidity in the banking system has remained in surplus in the past few weeks despite the central bank conducting variable rate reverse repo (VRRR) auctions. This is because the inflows from G-SAP auctions, government spending, redemption, coupons and CIC paybacks have offset the outflows from GST and VRRR auctions.

Currently, the liquidity in the banking system is estimated to be in a surplus of around Rs 8.79 lakh crore.
In August, the Reserve Bank of India (RBI) injected liquidity worth Rs 50,000 crore through the purchase of government securities under the Government Securities Acquisition Programme, however, Rs 5.50 lakh crore has been withdrawn via VRRR.

Market participants expect that the liquidity in the system is expected to remain range-bound this week due to almost the same amount of inflows and outflows. Kotak Mahindra Bank report showed that the inflows of `99,840 crore is expected this week and Rs 1.06 lakh crore outflows can be seen.

Additionally, the demand from fund houses has improved substantially since June due to inflows into shorter end funds such as duration fund, ultra-short-term fund, liquid fund, etc. Mutual funds are larger buyers of short-term debt papers such as commercial papers and certificates of deposit.

Demand from fund houses also increased because the investment made by them in CPs have matured in the past few days.

Dealers with brokerage firm said that if such high liquidity persists in the system then yields on CPs are expected to moderate further. “It would be extremely difficult for the RBI to suck out this excess liquidity on a durable basis without hurting the bond market sentiment. T-Bill and money market rates may remain suppressed in the near term,” Pathak said.

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Best banking & PSU debt funds to invest in 2021, BFSI News, ET BFSI

Banking & Finance

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Mutual fund experts believe that given the uncertainty around rates and liquidity, the outlook for banking & PSU fund schemes continues to be positive. Banking & PSU funds have offered 5.35% returns in the last one year. Here is a monthly update our list of recommended banking & PSU funds for 2021. There is no change in our list of recommended banking & PSU funds in August.

Another update-LIC MF Banking & PSU Debt Fund lies in 3rd quartile for 5 months, was in 4th quartile before that and in 3rd quartile prior to it. The scheme has been slipping on the performance chart, but if you have investments in the scheme, you should hold onto them. We will continue to monitor the performance of the fund and update you.

Banking & PSU mutual funds have the mandate to invest at least 80% of their corpus in debt instruments of banks, public sector undertakings, public financial institutions. Because of the investment universe and the government ownership of most of the entities, investment experts consider these schemes as safer investments.

These schemes have the option to invest in private banks, too. However, since banks are tightly regulated and monitored by the Reserve Bank of India and the central government, many investors believe they are relatively safer even in times of crisis.

If you are looking for relatively safer investment options in the debt mutual fund category to invest for three years or more, you may consider investing in these schemes. They may offer you some extra after-tax returns than the traditional bank fixed deposits.

Best banking & PSU funds to invest in 2021

  • IDFC Banking & PSU Debt Fund
  • Axis Banking & PSU Debt Fund
  • Aditya Birla Sun Life Banking & PSU Debt Fund
  • DSP Banking & PSU Debt Fund
  • LIC MF Banking & PSU Debt Fund

Methodology
ETMutualFunds.com has employed the following parameters for shortlisting the debt mutual fund schemes.

1. Mean rolling returns: Rolled daily for the last three years.

2. Consistency in the last three years: Hurst Exponent, H is used for computing the consistency of a fund. The H exponent is a measure of randomness of NAV series of a fund. Funds with high H tend to exhibit low volatility compared to funds with low H.

i)When H = 0.5, the series of return is said to be a geometric Brownian time series. These type of time series is difficult to forecast.

ii)When H

iii)When H>0.5, the series is said to be persistent. The larger the value of H, the stronger is the trend of the series

3. Downside risk: We have considered only the negative returns given by the mutual fund scheme for this measure.

X =Returns below zero

Y = Sum of all squares of X

Z = Y/number of days taken for computing the ratio

Downside risk = Square root of Z

4. Outperformance: Fund Return – Benchmark return. Rolling returns rolled daily is used for computing the return of the fund and the benchmark and subsequently the Active return of the fund.

Asset size: For Debt funds, the threshold asset size is Rs 50 crore

(Disclaimer: past performance is no guarantee for future performance.)



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Best banking & PSU debt funds to invest in 2021, BFSI News, ET BFSI

Banking & Finance

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Mutual fund experts believe that given the uncertainty around rates and liquidity, the outlook for banking & PSU fund schemes continues to be positive. Banking & PSU funds have offered 5.35% returns in the last one year. Here is a monthly update our list of recommended banking & PSU funds for 2021. There is no change in our list of recommended banking & PSU funds in August.

Another update-LIC MF Banking & PSU Debt Fund lies in 3rd quartile for 5 months, was in 4th quartile before that and in 3rd quartile prior to it. The scheme has been slipping on the performance chart, but if you have investments in the scheme, you should hold onto them. We will continue to monitor the performance of the fund and update you.

Banking & PSU mutual funds have the mandate to invest at least 80% of their corpus in debt instruments of banks, public sector undertakings, public financial institutions. Because of the investment universe and the government ownership of most of the entities, investment experts consider these schemes as safer investments.

These schemes have the option to invest in private banks, too. However, since banks are tightly regulated and monitored by the Reserve Bank of India and the central government, many investors believe they are relatively safer even in times of crisis.

If you are looking for relatively safer investment options in the debt mutual fund category to invest for three years or more, you may consider investing in these schemes. They may offer you some extra after-tax returns than the traditional bank fixed deposits.

Best banking & PSU funds to invest in 2021

  • IDFC Banking & PSU Debt Fund
  • Axis Banking & PSU Debt Fund
  • Aditya Birla Sun Life Banking & PSU Debt Fund
  • DSP Banking & PSU Debt Fund
  • LIC MF Banking & PSU Debt Fund

Methodology
ETMutualFunds.com has employed the following parameters for shortlisting the debt mutual fund schemes.

1. Mean rolling returns: Rolled daily for the last three years.

2. Consistency in the last three years: Hurst Exponent, H is used for computing the consistency of a fund. The H exponent is a measure of randomness of NAV series of a fund. Funds with high H tend to exhibit low volatility compared to funds with low H.

i)When H = 0.5, the series of return is said to be a geometric Brownian time series. These type of time series is difficult to forecast.

ii)When H

iii)When H>0.5, the series is said to be persistent. The larger the value of H, the stronger is the trend of the series

3. Downside risk: We have considered only the negative returns given by the mutual fund scheme for this measure.

X =Returns below zero

Y = Sum of all squares of X

Z = Y/number of days taken for computing the ratio

Downside risk = Square root of Z

4. Outperformance: Fund Return – Benchmark return. Rolling returns rolled daily is used for computing the return of the fund and the benchmark and subsequently the Active return of the fund.

Asset size: For Debt funds, the threshold asset size is Rs 50 crore

(Disclaimer: past performance is no guarantee for future performance.)



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Bajaj Finserv gets Sebi nod to launch mutual fund business, BFSI News, ET BFSI

Personal Finance

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Bajaj Finserv said it has received an in-principle approval from the Securities and Exchange Board of India (SEBI) for sponsoring a mutual fund. The Company has received an In-Principle approval from Securities and Exchange Board of India (SEBI) vide their letter dated 23 August 2021, for sponsoring a Mutual Fund.

Accordingly, the company would be setting up an Asset Management Company and the Trustee Company, directly or indirectly i.e., itself or through its subsidiary in accordance with applicable SEBI Regulations and other applicable laws,” said the communication from Bajaj Finserv.

Bajaj Finserv Limited is a part of Bajaj Holdings & Investments Limited which focusses on lending, asset management, wealth management and insurance.

Earlier in August, online discount broker Samco Securities received capital markets regulator Sebi’s approval to launch its mutual fund business. All this comes after the Securities and Exchange Board of India (SEBI) allowed Fintechs to apply for mutual fund (MF) licenses, last year in December.

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Franklin Templeton’s Sanjay Sapre, BFSI News, ET BFSI

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Franklin Templeton Mutual Fund on Friday said its commitment to India remains ‘steadfast’ and the fund house has no plans to exit its operations in the country.

This comes following media reports suggesting intervention by the fund house’s US-headquartered parent seeking the diplomatic route for a “just and fair” hearing by market regulator Sebi in the investigation pertaining to six wound-up debt schemes.

According to the reports, Franklin Templeton had threatened to exit India if it was not given a fair hearing.

In a letter to investors Franklin Templeton Asset Management (India) Pvt Ltd President Sanjay Sapre said, “we have no plans to exit our India business. Any speculation suggesting otherwise, or any rumours around sale of business in India are incorrect and simply that-rumours”.

He reiterated that Franklin Templeton’s commitment to India remains steadfast.

Sapre said that Franklin Templeton was an early entrant in the Indian mutual fund industry and remained a part of the industry even while many other global asset managers decided to leave.

He, however, did not deny reports of engaging with government authorities.

“Our engagement with government authorities, in India and globally, is also something we, and many companies do, as a matter of course. We have endeavored to keep all stakeholders, including the relevant government and diplomatic authorities, appropriately informed of developments, and will continue to do so,” Sapre said.

According to him, the intention in reaching out remains bringing the current matters to an appropriate and satisfactory conclusion.

The fund house said it has full confidence in Securities and Exchange Board of India (Sebi) and all regulatory and statutory authorities.

Franklin Templeton MF said the fund house has been fully transparent with the regulator and extended fullest cooperation to them, to help them examine the circumstances surrounding the winding up of the six schemes by Franklin Templeton last year.

The fund house had closed six of its debt funds in April 2020, citing redemption pressures and lack of liquidity in the bond markets.

These schemes, together having an estimated amount of over Rs 25,000 crore assets under management, were Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund and Franklin India Income Opportunities Fund.

Sapre said the fund house’s primary focus over the last several months has been, and remains, on returning money to unit holders as quickly as possible.

In this regard, the fund house said it has directed its efforts to support SBI Funds Management, the liquidator appointed by the Supreme court, in monetizing the portfolios of these schemes and returning monies to investors at the earliest.



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Niyo plans to apply for mutual fund licence; aims to double user base by end of FY22, BFSI News, ET BFSI

Banking & Finance

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Niyo, a neobank, is keen to enter the asset management space and mulling to apply to Sebi for a mutual fund licence, a company official said on Thursday. The Bengaluru-based fintech firm, which started off with prepaid instruments, is targeting to more than double its user base to 5 million by the end of FY22 from the present 2 million on the back of new tie-ups with players in the financial services space.

“We are keen to enter the AMC space and are in the process of exploring the idea of applying for a licence,” its co-founder and Chief Technology Officer Virender Bisht told .

In December, Sebi had allowed fintech firms to apply for MF licences.

Niyo had had last year announced the acquisition of Goalwise, an MF distribution platform. The company already distributes insurance policies, has a presence in wealth management through an acquisition and also offers stock buying.

Niyo on Thursday announced a tie-up with Equitas Small Finance Bank, wherein it will be launching a co-branded digital first savings accounts platform initially aimed at the millennial segment.

Its founder and chief executive Vinay Bagri said the platform has features like an interest rate of over 7 per cent, and explained that savings account and wealth management offerings, when given together, can get stickiness to a relationship and make an account last for over a decade.

Niyo, which already has a presence on the wealth management side through an acquisition and also allows users to trade in equities through it, is targeting to add 1 million users from the partnership with Equitas by the end of 2021.

Equitas’ Chief Digital Officer Vaibhav Joshi said the lender has 8 lakh savings accounts at present and is aiming to more than double the number through the partnership.

Bagri said it is a savings account and wealth management proposition to start with, but eventually Niyo will be looking at offering lending solutions to the same segment as well.

Initially, there is no revenue generation possibility, but eventually once the user starts availing mutual funds or loans, it will help in revenue booking, Bisht added.

Bisht also said Niyo is also looking at a newer funding round later in 2021 to fuel its expansion, but stressed that the saving account opening partnership, its most ambitious business initiate yet, is not capital intensive.

The fintech company will get another 0.5 million users from a blue collar workers-focused offering for which it has tie-ups with other lenders, Bisht said, exuding confidence that the target of 5 million users is achievable.

At present, Niyo is a “growing” company with some of its offerings reporting operating profits, he said.

The biggest hindrance for the company for growing users was the inability to offer interest on deposits and also lack of UPI gateway, which gets sorted with the partnership with Equitas, Bisht said.



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Rakesh Jhunjhunwala, Samir Arora file for mutual fund license, BFSI News, ET BFSI

Personal Finance

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Months after Securities and exchange board of India relaxed norms, fintechs are making a beeline to apply for mutual funds. Four new companies have filed papers for mutual fund licenses in the last four months. Among these are two ace investors Rakesh Jhunjhunwala and Samir Arora.

Samir Arora’s Helios Capital Management and Rakesh Jhunjhunwala’s Alchemy Capital are among the four companies that have recently applied for the mutual fund status. It remains to be seen whether they get an approval for the same.

Apart from these two, Unifi Capital Private Limited and Wizemarkets Analytics Private Limited have applied for the mutual fund license.

Sebi in December paved the way for technology startups to enter the mutual fund business by waiving the profitability requirement, approved doing away with minimum promoter contribution toward further public offers (FPO), and also eased norms on investing in insolvent companies.

Before December, regulators required an entrant to have five years of experience in the financial services business, demonstrate three years of profitability, and maintain a net worth of Rs 50 crore.



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