I am 38. Below is my portfolio. I have surplus cash of around Rs 50,000 which I plan to invest in Reliance Growth through SIP route and stay invested for more than three years. Is it advisable to invest in one of the existing funds or should I instead go for a new fund?
- Raghu
At Value Research we do not advise investors to park their money in equity funds for short term. Ideally, you should invest in equity funds for a longer term - at least five years.
Although the funds that you have chosen are of good quality, there is a flaw in your allocation to these funds.
Currently, your portfolio has an exposure of around 60 per cent to mid-cap funds - Reliance Growth, Sundaram BNP Paribas Select Midcap and Franklin India Prima. If you choose to invest an additional Rs 50,000 in Reliance Growth, you will increase your exposure to mid-cap funds even further. These mid-cap funds may push the returns from your portfolio up in a rising market, but they will also fall harder during a downturn.
On the other hand, large-cap funds like DSPBR Top 100 Equity and BSL Frontline Equity may not give chart-topping returns in rising markets but they will provide downside protection when markets tumble.
Therefore, a conservative investor should make up the core of his portfolio with large or multi-cap funds that provide stable returns over the long run.
For a less volatile portfolio, do not have more than 20 per cent exposure to mid-cap funds. Hence, reduce your exposure to mid-cap funds to this level and invest your proceeds in the large-cap funds that you have in your portfolio.
(source:valueresearchonline.com)
Mutual Fund News update from Nishit Doshi (9824021680) a leading MF Advisor based in Ahmedabad. Gujarat.
Monday, August 9, 2010
Can You Lose Money in Debt Funds?
An article in the U.S-based business magazine Forbes earlier this year stated that net $35 billion was pulled out from U.S. equity funds in 2009, whereas $421 billion went into bond funds. The columnist had an interesting comment to make on what she called such “unsophisticated money in bonds”. She wondered if “investors understood how miserable things could get when the low interest rate party ended”. Thanks to what is happening in Europe, the party does not look like it is going to end soon, something even the columnist could not predict. However the point is interesting. The stampede into bonds funds was not just about low short-term interest rates but about individuals who could not handle the volatility of the stock market. Which brings us to our next issue: Before you plunge into a debt fund, ask yourself why you are putting money there in the first place.
Debt, like equity, is an asset class. And for the purpose of diversification, some amount of your investments must be in this asset class. Having said that, you definitely would have some amount of savings in fixed-return instruments like fixed deposits (FDs) or Public Provident Fund (PPF) or National Savings Certificate (NSC). So if you put money in debt funds, you should do it for specific reasons: either because the tenure of the instrument matches your need, the tax incidence is lower when compared to other fixed returns instruments or the return, in comparison, is higher. But don't view any mutual fund debt product as a quasi fixed return instrument. Debt funds do carry a fair amount of risk, some more than others. You could lose money here too.
Intrinsically, debt instruments imply a fixed tenure and a fixed return. In that sense, they are assured. However, once you invest in a mutual fund, other factors like interest rate movements, the fund manager's call on their direction, his trading skills and also the intrinsic quality of the portfolio play an important role. The last factor is especially crucial. The greater the magnitude of low quality paper in the portfolio, the higher the returns that the fund manager is in a position to generate. For instance, one could broadly say that the difference between AAA and AA rated paper could vary from 25 to 50bps (100 bps = 1%). Unfortunately, it's not that simple. Let's talk about paper from companies in different industries. The difference in AAA Manufacturing and AA Manufacturing would be 25bps (the lower rated paper giving the slightly higher return despite both being from the same industry). If the industries change to AAA Manufacturing and AA NBFC, the difference could be 1-1.5 per cent. On the other hand, if it was AAA NBFC but AA Manufacturing, the latter would still offer a lower return and the difference could be around -75bps.
In extreme scenarios, the difference between a AAA Manufacturing and AA Real Estate would be around 5-6 percentage points. But if the paper was BBB Real Estate (theoretically speaking), it would give around 12-15 percentage points higher than what a AAA Manufacturing paper would offer. So if a fund is offering fabulous returns, there could be a compromise here. And compromises always leave you vulnerable.
Even if fund managers pack their portfolios with high rated paper, there is the interest rate risk if they get their call wrong. This is all the more prevalent in funds of longer tenure. For instance, let's assume that Bond A has a coupon rate of 8 per cent. Now let's say there is an increase in interest rates and Bond B has been issued with a coupon rate of 9 per cent. Now the price of Bond A will fall (since it is offering a lower interest rate) as the yield of Bond A will adjust higher (since bond yields and prices are inversely related). Consequently, debt funds that hold Bond A will be impacted. If there are many such bonds in the portfolio, the cumulative impact on the NAV would be negative.
While at any given point of time, all these risks exist (see: What risks does your fund manager take?), there are different phases in the interest rate cycle and in the debt market history where different risks have been played out more prominently. During the period from 1997 right through 2003, huge money was made on interest rates because during this period rates came down from 14 per cent to 5 per cent (10-year yields). From then on till 2008, money was made by taking credit risks when BBB rated companies were borrowing at 14-15 per cent. In 2008, it was liquidity risk that took centre stage, though credit risk was also prominent.
Mid-2009, credit opportunities (crop) funds began to catch the fancy of investors when yield spreads (difference in yields between benchmark sovereign paper and corporate bonds) widened to up to 200-300bps. The credit market presented an attractive risk-return profile as even good companies found it difficult to raise debt. Such funds are designed for risk-taking investors since they invest in high-return, low-rated paper. In such funds, the credit risk and liquidity risk run high. Right now there are a few options in the market: DWS Cash Opportunities, Religare Credit Opportunities and Kotak Credit Opportunities. While their profile could be riskier than that of other funds of similar duration, none of them take very high risks. They tend not to go below A-rated paper, stretching it to probably AA-. Says a fund manager from one of the fund houses which runs a crop fund: “If you look at the credit rating history of CRISIL over the past 15 years, there has been no default from any AA-rated entity over a 1-year period.” In fact, a number of measures are put in place to ensure that these funds are not taking undue amounts of risk. Not going for paper rated below A, being cautious on the reputation of the paper issuer, lower investment ticket sizes and portfolios with shorter average maturity duration. If you are willing to take a slightly higher risk with your debt portfolio, consider such funds.
What risks does your fund manager take?
Interest Rate Risk: When interest rates rise, bond prices fall. So if the fund manager has his portfolio stacked with lower interest rate paper, the prices of his holdings will fall resulting in a lower NAV. On the other hand, if interest rates fall then the price of his holdings rise and so does his NAV.
The longer a bond's maturity, the greater the interest rate risk. A bond fund with a longer average maturity will see its net asset value (NAV) react more dramatically to changes in interest rates as the prices of the underlying bonds in the portfolio increase or decline.
Credit Risk: Bonds carry the risk of default, meaning that the issuer is unable to make further interest or principal payments. They are rated by individual credit rating agencies to help describe the credit worthiness of the issuer. Higher the credit rating, lower the risk and lower the returns. Lower the credit rating, higher the risk and higher the return.
Liquidity Risk: If the credit rating gets downgraded or the current interest rates are much higher than the coupon rate, then the bond would face liquidity issues because finding a buyer would no longer be easy. Liquidity risk describes the danger when one has to sell a bond in the secondary market but is unable to find a buyer.
(source:valueresearchonline.com)
Debt, like equity, is an asset class. And for the purpose of diversification, some amount of your investments must be in this asset class. Having said that, you definitely would have some amount of savings in fixed-return instruments like fixed deposits (FDs) or Public Provident Fund (PPF) or National Savings Certificate (NSC). So if you put money in debt funds, you should do it for specific reasons: either because the tenure of the instrument matches your need, the tax incidence is lower when compared to other fixed returns instruments or the return, in comparison, is higher. But don't view any mutual fund debt product as a quasi fixed return instrument. Debt funds do carry a fair amount of risk, some more than others. You could lose money here too.
Intrinsically, debt instruments imply a fixed tenure and a fixed return. In that sense, they are assured. However, once you invest in a mutual fund, other factors like interest rate movements, the fund manager's call on their direction, his trading skills and also the intrinsic quality of the portfolio play an important role. The last factor is especially crucial. The greater the magnitude of low quality paper in the portfolio, the higher the returns that the fund manager is in a position to generate. For instance, one could broadly say that the difference between AAA and AA rated paper could vary from 25 to 50bps (100 bps = 1%). Unfortunately, it's not that simple. Let's talk about paper from companies in different industries. The difference in AAA Manufacturing and AA Manufacturing would be 25bps (the lower rated paper giving the slightly higher return despite both being from the same industry). If the industries change to AAA Manufacturing and AA NBFC, the difference could be 1-1.5 per cent. On the other hand, if it was AAA NBFC but AA Manufacturing, the latter would still offer a lower return and the difference could be around -75bps.
In extreme scenarios, the difference between a AAA Manufacturing and AA Real Estate would be around 5-6 percentage points. But if the paper was BBB Real Estate (theoretically speaking), it would give around 12-15 percentage points higher than what a AAA Manufacturing paper would offer. So if a fund is offering fabulous returns, there could be a compromise here. And compromises always leave you vulnerable.
Even if fund managers pack their portfolios with high rated paper, there is the interest rate risk if they get their call wrong. This is all the more prevalent in funds of longer tenure. For instance, let's assume that Bond A has a coupon rate of 8 per cent. Now let's say there is an increase in interest rates and Bond B has been issued with a coupon rate of 9 per cent. Now the price of Bond A will fall (since it is offering a lower interest rate) as the yield of Bond A will adjust higher (since bond yields and prices are inversely related). Consequently, debt funds that hold Bond A will be impacted. If there are many such bonds in the portfolio, the cumulative impact on the NAV would be negative.
While at any given point of time, all these risks exist (see: What risks does your fund manager take?), there are different phases in the interest rate cycle and in the debt market history where different risks have been played out more prominently. During the period from 1997 right through 2003, huge money was made on interest rates because during this period rates came down from 14 per cent to 5 per cent (10-year yields). From then on till 2008, money was made by taking credit risks when BBB rated companies were borrowing at 14-15 per cent. In 2008, it was liquidity risk that took centre stage, though credit risk was also prominent.
Mid-2009, credit opportunities (crop) funds began to catch the fancy of investors when yield spreads (difference in yields between benchmark sovereign paper and corporate bonds) widened to up to 200-300bps. The credit market presented an attractive risk-return profile as even good companies found it difficult to raise debt. Such funds are designed for risk-taking investors since they invest in high-return, low-rated paper. In such funds, the credit risk and liquidity risk run high. Right now there are a few options in the market: DWS Cash Opportunities, Religare Credit Opportunities and Kotak Credit Opportunities. While their profile could be riskier than that of other funds of similar duration, none of them take very high risks. They tend not to go below A-rated paper, stretching it to probably AA-. Says a fund manager from one of the fund houses which runs a crop fund: “If you look at the credit rating history of CRISIL over the past 15 years, there has been no default from any AA-rated entity over a 1-year period.” In fact, a number of measures are put in place to ensure that these funds are not taking undue amounts of risk. Not going for paper rated below A, being cautious on the reputation of the paper issuer, lower investment ticket sizes and portfolios with shorter average maturity duration. If you are willing to take a slightly higher risk with your debt portfolio, consider such funds.
What risks does your fund manager take?
Interest Rate Risk: When interest rates rise, bond prices fall. So if the fund manager has his portfolio stacked with lower interest rate paper, the prices of his holdings will fall resulting in a lower NAV. On the other hand, if interest rates fall then the price of his holdings rise and so does his NAV.
The longer a bond's maturity, the greater the interest rate risk. A bond fund with a longer average maturity will see its net asset value (NAV) react more dramatically to changes in interest rates as the prices of the underlying bonds in the portfolio increase or decline.
Credit Risk: Bonds carry the risk of default, meaning that the issuer is unable to make further interest or principal payments. They are rated by individual credit rating agencies to help describe the credit worthiness of the issuer. Higher the credit rating, lower the risk and lower the returns. Lower the credit rating, higher the risk and higher the return.
Liquidity Risk: If the credit rating gets downgraded or the current interest rates are much higher than the coupon rate, then the bond would face liquidity issues because finding a buyer would no longer be easy. Liquidity risk describes the danger when one has to sell a bond in the secondary market but is unable to find a buyer.
(source:valueresearchonline.com)
Nothing's Guaranteed
Don't let the name mislead you. You are not assured of a monthly return where such a scheme is concerned. Fund houses attempt to give regular dividends on their Monthly Income Plans (MIPs) but are not bound to declare them every month. So do not view this investment as a guaranteed return product. MIPs are hybrid investments, meaning they combine debt and equity in their portfolios. Thanks to the extra zing given by the equity allocation, their returns will be higher than that of a pure debt scheme. Each MIP will have its own mandate on how much the equity allocation has to be (15-25%). The balance can be in debt and money market instruments. While the equity exposure adds some amount of risk to the overall product, it would be wise to check this allocation. If the exposure to smaller cap companies is large, that would make it all the more risky.
Look at the debt exposure too. MIPs with lower equity allocations tend to take slightly higher risk (interest rate risk) and go with higher duration portfolios. But aggressive ones (higher equity allocation) opt for shorter duration debt portfolios.
What investors should note
Ultra-conservative investors or those who have retired and are living off their earnings and cannot afford to see a dip in their investments should not consider MIPs. Instead, consider a safe avenue like a post office monthly income scheme or bank deposit.
The returns, like any other fund, are market-driven. You have absolutely no guarantees here.
Though many fund houses strive to declare a monthly dividend, they have no such obligation.
If you are not in need of any income, don't consider this type of fund. Instead look at a balanced fund.
If you would like some sort of income but are not dependent on it for your bread and butter, then consider the various options available - monthly, quarterly, half-yearly or annual. In some instances, a growth option can be offered where regular dividends are not offered but capital appreciation is.
Dividends declared under MIPs are tax free.
(source:valureresearchonline)
Look at the debt exposure too. MIPs with lower equity allocations tend to take slightly higher risk (interest rate risk) and go with higher duration portfolios. But aggressive ones (higher equity allocation) opt for shorter duration debt portfolios.
What investors should note
Ultra-conservative investors or those who have retired and are living off their earnings and cannot afford to see a dip in their investments should not consider MIPs. Instead, consider a safe avenue like a post office monthly income scheme or bank deposit.
The returns, like any other fund, are market-driven. You have absolutely no guarantees here.
Though many fund houses strive to declare a monthly dividend, they have no such obligation.
If you are not in need of any income, don't consider this type of fund. Instead look at a balanced fund.
If you would like some sort of income but are not dependent on it for your bread and butter, then consider the various options available - monthly, quarterly, half-yearly or annual. In some instances, a growth option can be offered where regular dividends are not offered but capital appreciation is.
Dividends declared under MIPs are tax free.
(source:valureresearchonline)
Wednesday, July 7, 2010
MFs are now attempting to push ‘simplified products’ like hybrid funds, having learnt a hard lesson after the NFO boom of 2006-07. Except that they ar
Faced with dwindling assets caused by changing regulation and investor apathy, mutual fund companies have now hit upon a new strategy - launch all-in-one or hybrid products. These products combine multiple asset classes in one, supposedly making the job of asset allocation easy. Axis Triple Advantage Fund, now on offer, gives investors the chance to participate in three asset classes - equity-related, fixed income and gold. In April 2010 Religare Mutual Fund pioneered the move in this direction by launching a scheme that seeks to generate income through a portfolio of fixed income securities, gold and equity-related instruments. The scheme would invest 65%-90% in debt instruments, 0%-25% in equity and 10%-35% in gold ETFs (exchange-traded funds). The scheme is benchmarked against CRISIL MIP Blended Fund Index (65%) and price of gold (35%). Taurus Mutual Fund has just launched an open-ended income scheme called 'Taurus MIP Advantage' fund. The scheme is identical to Religare's. It aims to generate regular income through a portfolio of fixed-income securities, Gold ETFs and equity. The scheme is benchmarked against CRISIL MIP Blended Fund Index (75%) and price of gold (25%). Clearly, no sooner has one fund company launched a new kind of product than lemming-like, others are rushing in, offering identical products.
But what is the reason that fund companies are looking at hybrid funds for their salvation? It appears that the stricter regulations enforced by the Securities and Exchange Board of India since August last year has led to a drop in new sales of equity funds and some deep introspection among the fund community. Since the massive bull run of 2003-2007, the only way fund companies wanted to grow was bringing new funds to the market. The standard strategy was to tempt investors with new fund offers (NFOs), many of which had fancy names and complicated strategies. Fund companies gave fat incentives to distributors in order to encourage investors to sell their existing funds and buy the new ones - especially since they were available for Rs10 - which was of course, highly misleading. Unfortunately, this led to terrible performance of the vast majority of funds launched during this period. And when SEBI took away the fat upfront incentives for distributors, fund sales nosedived. Now, the MF industry is aiming to build rapport with investors by offering 'simplified' solutions to them in the form of hybrid funds.
The logic behind it is to offer investors the 'opportunity' to participate and gain exposure to different asset classes under one roof. Hybrid funds invest in a mix of equity and equity-related instruments and fixed-income securities. Some even invest part of the corpus in gold ETFs (exchange traded funds), a recent favourite among investors. This stands in sharp contrast to the relentless spewing of innovative and complicated fund offerings in the recent past.
Rajiv Anand, managing director and CEO of Axis Asset Management Co Ltd recently wrote in newspaper Mint that "MFs spend a lot on getting new investors, but pay little attention to existing ones. But MFs are not a one-time fill-it-forget-it product... We need to find ways to meaningfully engage with these investors." In a burst of plain speaking Mr Anand wrote, "In all the cloud and dust created by a surfeit of NFOs and products, the ultimate use of the product has been completely compromised somehow." According to him the biggest challenge for the fund houses and distributors is to prepare themselves for the arduous journey of getting investments in their existing funds pretty much on a 24x7x365 basis." You thought that Axis Mutual Fund would stop launching NFOs and push its existing products? Despite all this talk, Axis has gone down the same road as its peers and done exactly what the rest are doing. It has announced a me-too NFO! It seems that fund companies will continue to move in herds and be driven by the fad of the day. Interestingly, coinciding with the Axis Bank NFO opening for subscription, Mint gave Mr Anand an opportunity in to beat his own drum: "The one obvious way is to educate, and, perhaps, the other is to ensure that products… should blend equity and debt components. In other words, they should be hybrid funds." How nicely self-serving.
That leaves us with one last question. Do the 'simplified' hybrid offerings make sense for investors? Hybrid funds, in essence, are souped-up versions of existing products in the market - like balanced funds and monthly income plans (MIPs). While these offer investors capital protection with a chance to participate in equity markets, hybrid funds go a step further - they simply add gold to the soup. Instead of simplifying matters, hybrid funds would only complicate them further. They will not match the returns of equity, they will be marginally better than debt, they will still be more volatile than fixed income. Finally, gold, now historically high, may drag down their returns drastically. Invariably, such funds will lead to very average returns for the investor. The question is do investors care anyway, as long the fund industry tries to do everything except one thing they need to do - directly reach out to investors and engage them?
(source:moneylife)
But what is the reason that fund companies are looking at hybrid funds for their salvation? It appears that the stricter regulations enforced by the Securities and Exchange Board of India since August last year has led to a drop in new sales of equity funds and some deep introspection among the fund community. Since the massive bull run of 2003-2007, the only way fund companies wanted to grow was bringing new funds to the market. The standard strategy was to tempt investors with new fund offers (NFOs), many of which had fancy names and complicated strategies. Fund companies gave fat incentives to distributors in order to encourage investors to sell their existing funds and buy the new ones - especially since they were available for Rs10 - which was of course, highly misleading. Unfortunately, this led to terrible performance of the vast majority of funds launched during this period. And when SEBI took away the fat upfront incentives for distributors, fund sales nosedived. Now, the MF industry is aiming to build rapport with investors by offering 'simplified' solutions to them in the form of hybrid funds.
The logic behind it is to offer investors the 'opportunity' to participate and gain exposure to different asset classes under one roof. Hybrid funds invest in a mix of equity and equity-related instruments and fixed-income securities. Some even invest part of the corpus in gold ETFs (exchange traded funds), a recent favourite among investors. This stands in sharp contrast to the relentless spewing of innovative and complicated fund offerings in the recent past.
Rajiv Anand, managing director and CEO of Axis Asset Management Co Ltd recently wrote in newspaper Mint that "MFs spend a lot on getting new investors, but pay little attention to existing ones. But MFs are not a one-time fill-it-forget-it product... We need to find ways to meaningfully engage with these investors." In a burst of plain speaking Mr Anand wrote, "In all the cloud and dust created by a surfeit of NFOs and products, the ultimate use of the product has been completely compromised somehow." According to him the biggest challenge for the fund houses and distributors is to prepare themselves for the arduous journey of getting investments in their existing funds pretty much on a 24x7x365 basis." You thought that Axis Mutual Fund would stop launching NFOs and push its existing products? Despite all this talk, Axis has gone down the same road as its peers and done exactly what the rest are doing. It has announced a me-too NFO! It seems that fund companies will continue to move in herds and be driven by the fad of the day. Interestingly, coinciding with the Axis Bank NFO opening for subscription, Mint gave Mr Anand an opportunity in to beat his own drum: "The one obvious way is to educate, and, perhaps, the other is to ensure that products… should blend equity and debt components. In other words, they should be hybrid funds." How nicely self-serving.
That leaves us with one last question. Do the 'simplified' hybrid offerings make sense for investors? Hybrid funds, in essence, are souped-up versions of existing products in the market - like balanced funds and monthly income plans (MIPs). While these offer investors capital protection with a chance to participate in equity markets, hybrid funds go a step further - they simply add gold to the soup. Instead of simplifying matters, hybrid funds would only complicate them further. They will not match the returns of equity, they will be marginally better than debt, they will still be more volatile than fixed income. Finally, gold, now historically high, may drag down their returns drastically. Invariably, such funds will lead to very average returns for the investor. The question is do investors care anyway, as long the fund industry tries to do everything except one thing they need to do - directly reach out to investors and engage them?
(source:moneylife)
Monday, July 5, 2010
MF investors to get single statement for all schemes
Suresh Nandi Mumbai, July3, DHNS
If you are a mutual fund investor with money locked up in different fund houses and tired of getting different statement of accounts for each one of them, then you are in for a relief soon.
MF investors to get single statement for all schemes
Suresh Nandi Mumbai, July3, DHNS
If you are a mutual fund investor with money locked up in different fund houses and tired of getting different statement of accounts for each one of them, then you are in for a relief soon.
Securities & Exchange Board of India (Sebi) is contemplating to cut down paperwork and provide common account statement for all mutual fund investors with the help of registrar and transfer agencts (RTAs). To start with, Sebi has asked four RTAs such as Computer Age Management Services (CAMS), Deutsche Investor Services, Franklin Templeton and Karvy Mutual Fund Services to combine investor data together and provide consolidated statement of account for all investments in mutual funds. This apparently will reduce paperwork and cost for asset management companies (AMCs) too.
The four RTAs have already begun work on compiling investor data, sources said. The plan is to set up separate platform so that the industry can deliver one statement across investments in various mutual funds, they said adding: “We have already initiated work on conceptualisation and scope of services. As huge economies will flow in, it will reduce the efforts of investors and distributors.”
Efforts are two pronged. One is those who have demat account (equity investors) can get their MF units in demat form for which consolidated information is available with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limtied (CDSL). Another is on clubbing RTA data to provide consolidated statement.
Though resources are available for aggregating data, there will be no sharing of investor information between NSDL and RTAs. Any data aggregation will be based on PAN among other things, a source said. If investors are holding MF units in demat form with NSDL or CSDL and also some units through RTAs, they will get two separate consolidated statements – one from NSDL and other consolidated statement from four RTAs.
If they (investors) are also holding stocks, then same demat statement will reflect their stock and fund investments together. If investors information are with RTAs, then they will get single account statement across RTAs. Plans are to eventually club this data across all RTAs – as against current 4 RTAs – and send single consolidated statement to MF investors. The RTAs are awaiting Sebi’s nod for implementing this new system, which is expected to happen in the next 3-6 months.
Sebi Executive Director K N Vaidyanathan recently shared this plan with the participants stating: “The third area where regulator is focussed was for those who come directly through asset management companies or one of the investors services like Karvy or CAMS. We want to make sure that if investors so choose they should get single view.
We will put in place a mechanism to that effect.”
(source : http://www.deccanherald.com)
If you are a mutual fund investor with money locked up in different fund houses and tired of getting different statement of accounts for each one of them, then you are in for a relief soon.
MF investors to get single statement for all schemes
Suresh Nandi Mumbai, July3, DHNS
If you are a mutual fund investor with money locked up in different fund houses and tired of getting different statement of accounts for each one of them, then you are in for a relief soon.
Securities & Exchange Board of India (Sebi) is contemplating to cut down paperwork and provide common account statement for all mutual fund investors with the help of registrar and transfer agencts (RTAs). To start with, Sebi has asked four RTAs such as Computer Age Management Services (CAMS), Deutsche Investor Services, Franklin Templeton and Karvy Mutual Fund Services to combine investor data together and provide consolidated statement of account for all investments in mutual funds. This apparently will reduce paperwork and cost for asset management companies (AMCs) too.
The four RTAs have already begun work on compiling investor data, sources said. The plan is to set up separate platform so that the industry can deliver one statement across investments in various mutual funds, they said adding: “We have already initiated work on conceptualisation and scope of services. As huge economies will flow in, it will reduce the efforts of investors and distributors.”
Efforts are two pronged. One is those who have demat account (equity investors) can get their MF units in demat form for which consolidated information is available with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limtied (CDSL). Another is on clubbing RTA data to provide consolidated statement.
Though resources are available for aggregating data, there will be no sharing of investor information between NSDL and RTAs. Any data aggregation will be based on PAN among other things, a source said. If investors are holding MF units in demat form with NSDL or CSDL and also some units through RTAs, they will get two separate consolidated statements – one from NSDL and other consolidated statement from four RTAs.
If they (investors) are also holding stocks, then same demat statement will reflect their stock and fund investments together. If investors information are with RTAs, then they will get single account statement across RTAs. Plans are to eventually club this data across all RTAs – as against current 4 RTAs – and send single consolidated statement to MF investors. The RTAs are awaiting Sebi’s nod for implementing this new system, which is expected to happen in the next 3-6 months.
Sebi Executive Director K N Vaidyanathan recently shared this plan with the participants stating: “The third area where regulator is focussed was for those who come directly through asset management companies or one of the investors services like Karvy or CAMS. We want to make sure that if investors so choose they should get single view.
We will put in place a mechanism to that effect.”
(source : http://www.deccanherald.com)
Subscribe to:
Posts (Atom)