FUND FULCRUM - MAY 2008

Fund Fulcrum

(May 2008)

The average assets under management (AAUM) of the 34 member mutual fund industry rose by 7.33% to Rs. 567601.98 crores in the month of April 2008 as per the data released by AMFI. Compared to March, April has been great for the mutual fund industry, as 28 AMCs out of 34 posted positive growth in their AAUM. Reliance Mutual Fund has again topped the chart with an AAUM of Rs. 96,386.40 crores, just short of the golden 1 trillion mark. Reliance Mutual Fund acquired the lion’s share by managing 17% assets of the entire mutual fund industry. Reliance Mutual Fund is continuously stretching the gap with it peers, since the fund is unbeatably ruling the mutual fund industry for a little more than a year. Three months after its launch in January 2008, Reliance Natural Resources Fund has emerged as India's largest equity fund with assets under management of Rs 5,589 crores. The fund overtook ICICI Prudential Infrastructure Fund which topped the charts in March with an AUM of Rs 5,390 crores. ICICI Prudential Mutual Fund and UTI Mutual Fund with AAUMs of Rs.55,708.52 crores and Rs. 52,549.40 crores continue to occupy the second and third positions respectively.The market has gone up by around 10 per cent this month, whereas the increase in the asset base has been less than that - this means that the gain is not significant, as it shows that investors are not really back. The debt funds seem to have come back in a big way in April after a big lull in the past two months.

UTI Mutual Fund has won the Lipper Fund Awards Gulf 2008 for best group over the past three years ending Dec. 31, 2007. In addition, two schemes of the fund house, UTI Banking Sector Fund-Dividend (in the equity-oriented category) and UTI Mahila Unit Scheme (in the mixed assets category), have won Lipper Fund Awards Gulf 2008.

Piquant Parade

Birla Sun Life AMC set a precedence by becoming the first Asset Management Company in India to be awarded the coveted ISO 9001:2000 certification.

Life Insurance firm Aviva India is planning to foray into mutual funds while Edelweiss Capital has received the approval from SEBI, to start its asset management business. Edelweiss plans to launch more than 8-9 products in the mutual fund domain within one year.

In a move that would enable Muslims in India to participate in the stock market, four asset management companies - Reliance Mutual Fund , UTI Asset Management, Way2Wealth and the newly-approved Edelweiss Mutual Fund - are planning to launch Shariah-compliant mutual funds in the coming months.

UTI Mutual Fund has begun managing pension funds totalling Rs 500 crore - comprising contributions from staff in government undertakings - from the end of March, and is now hoping for an approval to manage the investments of the Employee Provident Fund Organisation, National Investment Fund (made up of proceeds from disinvestment) and Postal Life Insurance.

UTI Mutual Fund opens a new UTI Financial Centre at Sambalpur.

Reliance Capital Asset Management plans to offer life insurance cover to investors opting for SIP route in 11 of its funds. Upon the pre-mature death of an investor opting for SIP of 3-15 years, the firm will pay the balance unpaid SIP installments subject to a maximum of Rs 1 million. The scheme will be effective May 12, 2008.

JP Morgan Asset Management India is offering Optimiser Systematic Transfer Plan that allows investors to invest a lump sum amount in JPMorgan India Liquid Fund or JPMorgan India Liquid Plus Fund and through STP, a prefixed amount, as indicated by the investor, will be transferred periodically (daily, weekly, monthly or quarterly) from this fund to any of the existing equity schemes managed by JPMorgan Mutual Fund.

ICICI Prudential AMC has taken a pioneering step towards transparency and investors’ right to information. For the first time in the history of the Indian Mutual Fund Industry, the fact sheet will provide details of obligators, underlying asset class, rating etc on a consolidated basis across the entire fixed income portfolio which will play a key role in aiding investors gain complete insight of their investment and evaluate the credit quality of their portfolio.

Fidelity Fund Management and Birla Sun Life Asset Management Company have entered into agreements for the distribution of their products with Federal Bank and and The Jammu & Kashmir Bank respectively.

The Birla group is planning to expand the network of its mutual fund branches to 150 this fiscal from 78 at present.

HDFC will soon enable its customers to buy and sell mutual funds through mobile phones using applications from ngpay, a mobile commerce network company.

Regulatory Rigmarole

Portfolio Managers will not be permitted to float a scheme or pool the resources of the clients (akin to mutual fund activity). A time frame of 6-months from the date of notification has been given to convert their operations managed on pooled basis to individual basis.

In order to standardize the calculation of net assets under management (NAUM) and average assets under management (AAUM), SEBI in consultation with AMFI has taken several steps by way of introducing revised format of monthly cumulative report (MCR). The SEBI circular states that in future MCR will have to be presented to the regulator in the revised format by the third of each month. SEBI has also prescribed a methodology that calls for including AUM as on the last calendar year in the NAUM. Additionally, AAUM of the mutual fund shall be the aggregate of the daily AUM of the mutual fund over calendar days in the relevant month irrespective of date of allotment/maturity of the schemes.

SEBI has simplified the offer document and key information memorandum (KIM) to be filed by mutual funds to make them reader friendly. The measures are aimed at reducing the bulkiness of the offer document (OD). A committee set up by AMFI had recommended that the existing OD may be split into two parts — statement of additional information (SAI), a one-time filing common for all schemes and SID (Scheme Information Document), which is scheme specific. All mutual fund scheme ODs filed with SEBI on or after June 1, 2008 will have to be prepared in the new format.

Albeit the market currently seems to be in an adjustment phase after the Sensex reached a pinnacle in the beginning of 2008, about 4.5 lakh Systematic Investment Plans have been added to the mutual funds’ bag in 2008 till now. The total number of SIPs reached an exceedingly impressive 2.9 million (a yoy rate of 42%). Unlike the falls that we saw in May 2004 and May 2006 when the investors chose to go away from the funds or not come in at all, mutual funds have experienced more retail participation in May 2008. This is expected to widen with the expanding reach across the country with more number of players stepping in the mutual fund industry.

It is vacation time again…time for a brief bout of relaxation…a slow down in the pace of blogging…In the ensuing three months, the monthly mutual fund round-up, FUND FULCRUM alone will appear on the last Monday of each month. From September, the weekly blogs will blossom again…