Air India begins sounding LIC and mutual funds for bond sale

Government-owned Air India, which is to issue non-convertible debentures (NCDs) to raise funds for repaying its debt mountain, has begun informally sounding Life Insurance Corporation (LIC) of India, mutual fund houses and government-owned non-life insurance companies to subscribe to the issue, bankers said.

Permission from a group of ministers came yesterday for the NCD issue, as part of a debt recast plan; it has still to be approved by the Cabinet.

The NCDs are, goes the proposal, to be guaranteed by the government and aimed to raise Rs 7,400 crore. They’d have a 20-year maturity and carry a slightly higher coupon rate than comparable government securities.

At present, the yield on government bonds maturing in 2030 is 8.55 per cent, according to Clearing Corporation of India data.

Sources said AI and merchant bankers to the issue would make a detailed presentation to prospective investors within the next few days. “We are yet to receive any formal proposal from Air India, but we will look into it. Since AI bonds will be government-guaranteed, these will be safe investments,” said a top LIC official.

Funds won’t be a problem for the insurance behemoth and it has plans to invest Rs 80,000 crore in debt and equities during the January-March period of the current financial year.

Of this, Rs 60,000-75,000 crore would be invested in debt instruments, with the rest to equities. So far during 2011-12, the largest life insurer in the country has invested Rs 1.15 lakh crore, of which Rs 25,000 crore was in equities.

Of around Rs 90,000 crore debt investments, a large part has gone to government securities and 25-30 per cent in corporate instruments. In 2010-11, LIC invested Rs 1.95 lakh crore, of which Rs 43,000 crore was in equities.

Of total AI debt of Rs 43,000 crore, as much as Rs 22,500 crore was proposed for restructuring. While Air India will pay back Rs 7,400 crore to banks, the remaining amount will be converted into long-term loans, with an interest rate of 11 per cent.

Due to the recast, banks have to make a provision of around Rs 2,000 crore. A consortium of 26 banks, including Punjab National Bank, Bank of Baroda and Central Bank of India, with State Bank of India as the lead institution, have exposure to the troubled carrier.

The Reserve Bank of India has said the restructuring should be completed by March 20, failing which banks have to classify the exposure as a non-performing asset.

Source: Business Standard

MF Global shortfall may be up to $1.2 bn

The shortfall in MF Global Inc’s US segregated customer accounts may exceed $1.2 billion, more than double what was previously expected, said a trustee overseeing a liquidation of the failed brokerage.

That would mean customer accounts are missing about 22 per cent of their total of $5.4 billion. A shortfall of 11 per cent had been previously estimated by a person with knowledge of probes into the firm’s collapse. James Giddens, the trustee, said yesterday that forensic accountants and investigators were working “around the clock,” and the estimate may change.

“Our goal is still a 100 per cent return, and right now, we’re very close to 60 per cent,” said Kent Jarrell, a spokesman for the trustee. “If we continue to recover more, that will determine how much more we can distribute.”

Jarrell said the $1.2 billion estimate came from the team of accountants and investigators who met with the trustee last night, prompting him to publish the revised figure. The spokesman declined to comment on whether there was news as to who was responsible for the funds or how they were withdrawn or used, citing ongoing investigations from the Department of Justice and other agencies.

ASSETS UNDER CONTROL

Giddens said distributing 60 per cent of what should have been in commodity customers’ accounts, already under way, would take $1.3 billion to $1.6 billion, or almost all of the assets he had within his control. While he expected the transfer to occur in early December, he didn’t have access to funds beyond $1.6 billion, he said.

The shortfall is primarily in commodity accounts. Money frozen in securities accounts will be refunded through a separate segregated account, Jarrell said. MF Global had 38,000 commodity clients. “He is very close to exhausting the funds under his control,” according to the statement. Recovering funds from foreign depositories may take more time, Giddens said.

Source: Business Standard

Bank of India likely to relaunch mutual fund biz by December

MUMBAI, NOV 20: Bank of India has decided to advance its proposed re—entry into the mutual fund business by a few months to December.

“We are working on it (MF business)... by December, I suppose we should have something in place,” Bank of India chairman and managing director, Mr Alok Misra, told PTI.

He refused to give more details on the business model saying the bank is working out the details. He also refused to say whether it will be a joint venture or not.

Earlier this year, the bank had said it would launch its MF business by early 2012 and was scouting for a partner.

It was also reportedly in talks with Bharti Axa Investment Managers and Pramerica AMC which were planning to sell their stakes.

BoI was in the MF business in 1990. Of the six schemes launched by the fund, four had been redeemed and two schemes transferred to Tauras Mutual Fund after giving exit option to investors in 2004.

Banks generally enter the MF space as they can leverage on their branches for distribution, which in turn would help cut cost of delivery, thus improving business efficiency.

Currently, there are eight MFs either fully or partly owned by banks along with overseas partners. These include Baroda Pioneer Mutual Fund, Canara Robeco Mutual Fund, ICICI Prudential MF, Principal MF of PNB and SBI Mutual Fund, Axis MF, IDBI Mutual Fund and Union KBC MF of Union Bank.

There are 40 MF players in the country with average asset under management of over Rs 7 trillion.

Bajaj Finserv gets SEBI approval for mutual fund business

MUMBAI: Bajaj FinServ, the financial services arm of Bajaj Group, has received approval from the capital markets regulator Sebi for setting up mutual fund business and is likely to enter the fray by end-2012, a top official said today.

"We have received the Sebi approval and are evaluating the right business model," the company's Managing Director Sanjiv Bajaj told reporters on the sidelines of the India Economic Summit of the World Economic Forum here.

He, however, said the company's consumer lending business may be hit going forward.

"Going ahead, it(consumer lending) will slow down. Consumer lending is the last one to be affected in a high rates cycle and I see some impact on the vertical," Bajaj said.

Bajaj FinServ's business plans continue to be "steady" even as fears of a slowdown are being expressed, he said.

"The market is large enough for us to find our attractive business," he said adding that a lot remains to be done on the inflation front.

Bajaj Finserv posted a more than two times rise in its net profit at Rs 158 crore in the second quarter of current fiscal on the back of sound rise in income in its general, and life insurance business among others.

Net profit during the July-September period of the company was at Rs 69 crore.

Total income during this period rose by 52 per cent to Rs 714 crore compared to Rs 471 crore reported an year ago period.

Source: EconomicTimes

Mutual funds hike exposure to Reliance Industries; lower valuations attractive

NEW DELHI: Shares of Mukesh Ambani-led Reliance Industries may have traded weak on the bourses in the recent months, but mutual funds have enhanced their exposure to the stock, attracted by its lower valuation.

More than 200 mutual fund schemes purchased fresh RIL ( Reliance Industries Ltd) shares, worth an estimated Rs 1,500 crore at current value, during the last quarter.

In contrast, about 100 schemes sold RIL shares from their portfolio during the quarter ended September 30. These shares are worth about Rs 350 crore at the current market price.

The MF schemes having purchased fresh RIL shares during the quarter also included those from Anil Ambani-led group's Reliance MF, the country's biggest fund house.

Interestingly, the RIL stock fell sharply by about 11 per cent during the July-September 2011 quarter.

In the past one year, RIL stock has dipped by over 20 per cent and hit a 52-week low of Rs 713.55 on August 26, 2011 and is currently trading near Rs 884 level.

But, RIL figures prominently on the portfolios of various MF schemes, by virtue of being the country's most valued firm and its high weightage on key market indices including Sensex.

MFs collect money from various investors, including the retail participants, for their different schemes and then invests the same in stocks, bonds and other securities.

One fund house generally runs a number of schemes for different market segments.

RIL is the second most-held stock after ICICI Bank by all the fund houses together. It figures on the portfolios of more than 300 MF schemes and all the funds together held RIL shares worth about Rs 6,800 crore at the end of September.

An analysis of quarterly portfolio disclosures of various funds shows that as many as 210 schemes together bought more than 1.7 crore fresh shares of RIL during the last quarter.

On the other hand, about 41 lakh RIL shares were sold by a total of 97 MF schemes during the quarter.

Only two schemes, belonging to Franklin Templton MF, had no change in their RIL holding during the quarter.

Those having sold RIL shares included only one Reliance MF scheme, while about a dozen schemes of the fund house purchased fresh RIL shares during the quarter.

Besides, the shares were also bought by various schemes of ICICI Pru, UTI, HDFC, Birla Sunlife and Franklin Templeton.

Interestingly, Reliance MF had lowered its exposure to RIL in the last fiscal.

On its part, RIL continued to avoid Reliance MF for its investment needs during the fiscal ended March 31, 2011, even as it parked money in a host of schemes from other funds.

A host of other funds had cut their RIL exposure during the last fiscal and the stock lost its position as the top- held stock for overall mutual fund space to ICICI Bank.

Source: EconomicTimes

Franklin Templeton unveils Corporate Bond Fund

Mumbai: Franklin Templeton Investments has launched a NFO 'Templeton India Corporate Bond Opportunities Fund' aiming to help investors take advantage of the current high yields and to build a strong presence in pure fixed income space.

The new fund offer (NFO), opens for subscription on November 15 and closes on November 29.

The fund also aims at allowing capitalisation on opportunities by active interplay on credit, liquidity and interest rate opportunities, Franklin Templeton said in a release.

"We believe that the corporate bond market provides good opportunities in India for multiple reasons, including a fast growing economy, strong corporate balance sheets and expected increase in issuances. However, when compared to other similar markets, the corporate bond market in India is still at a nascent stage and is growing," Franklin Templeton India President Harshendu Bindal said.

The fund helps investors to take advantage of the current high yields and also potentially benefit from the capital gains once the interest cycle turns.

"The interest in corporate bonds is likely to grow, both from domestic and foreign investors. In the current environment, we expect corporate bonds in the 1-3 year segment to outperform, due to relatively higher spreads and the fund will benefit from higher accruals in the coming quarters," the asset management firm's Chief Investment Officer for fixed income Santosh Kamath said.

The minimum investment in the scheme is Rs 5,000, and a three percent interest will be charged if the investor exits within a year, 2 percent after a year but before two years and 1 percent after two years but before two-and-a-half years.

At the end of September quarter, Franklin Templeton managed average assets worth Rs 34,410.37 crore.

Source: Financial Express

IDBI Gold ETF NFO collects over Rs 110 cr

Mumbai: IDBI Gold Exchange Traded Fund, the new fund offer (NFO) launched by IDBI Asset Management, has collected over Rs 110 crore, predominantly from around 11,000 retail investors, including HNIs.

The NFO was open for subscription between October 19 and November 2 and the units will be allotted on November 9.

"In the current scenario of inflation and economic uncertainties, investment in gold could be viewed as a good hedge and prudent asset allocation strategy. We have collected over Rs 110 crore, predominantly from around 11,000 retail investors, including HNIs," IDBI Asset Management Managing Director and Chief Executive Officer, Debasish Mallick said in a statement here.

IDBI Gold ETF is designed with the purpose to invest in 'physical gold' with an objective to replicate the performance of gold in domestic prices. The Fund will adopt a passive investment strategy and seek to achieve investment objectives of scheme by minimising the tracking error between the fund and the underlying asset.

The NFO will be listed on NSE and BSE with effect from November 17, the release added.

Source: Financial Express

Indian Bank scraps plan to rope in partner for mutual fund business

Explores optionsof merging mutual fund asset management company with itself.

State-run lender Indian Bank has scrapped its plan to rope in a strategic partner for its mutual fund business because of uncertain macroeconomic environment and subdued market sentiments, Chairman and Managing Director T M Bhasin said on Saturday.

“It is not a right time to enter the mutual fund market. So, we are deliberately keeping a low profile,” Bhasin told Business Standard on the sidelines of BANCON 2011, an annual banking event jointly organised by Indian Banks’ Association and Indian Overseas Bank.

Indian Bank was earlier in talks with three overseas players for a strategic partnership in its mutual fund arm. The deal was expected to be signed by October and the lender expected to commence operations jointly from December.

“For the time being we will lie low in mutual fund. We may revisit our plan once the market improves. At least this financial year nothing will happen,” Bhasin said.

Indian Bank Mutual Fund through its asset management company Indfund Management was managing 12 close-ended schemes.

Nine schemes out of this were redeemed on maturity, while the rest three were transferred to Tata Mutual Fund on November 2001. The bank's mutual fund arm has not launched new schemes ever since.

The bank is also exploring options of merging the mutual fund asset management company with itself.

Bhasin said the bank had also decided to close all the 60 offices of Indbank Merchant Banking Services, a wholly-owned subsidiary of the bank offering merchant banking, advisory and broking services. The company will now operate from Indian Bank’s branches and pay a concessional rent to the bank.

“This will help us in earning revenues and help them in cutting expenses on rent. We will have around 200 counters of Indbank Merchant Banking Services across our branches in major cities,” Bhasin said.

He added the bank's housing finance arm will also be merged soon.

Source: Business Standard

KYC norms : New guidelines on KYC (Know Your Customer)

From January 1, Know Your Customer (KYC) requirements are mandatory for all investors, irrespective of the amount invested. 

What is KYC?

KYC means Know Your Customer. The Prevention of Money Laundering Act, requires every intermediary to have a client identification programme with a KYC policy, which means knowing your customer by seeking information and supporting documentation about the customer's identity and address, besides such other information as nationality, income source, occupation, etc.

Where and how does one get to be KYC-compliant?

The Association of Mutual Funds of India has facilitated a centralised platform through CDSL Ventures Limited (CVL), can carry out the KYC procedure on behalf of all mutual funds. CVL, through its points of service (POS), will accept KYC application forms, verify documents and provide the KYC acknowledgement.

Once the KYC is duly completed, the investor would have to produce a copy of the acknowledgement when investing for the first time with a fund.

Who needs to be KYC compliant?

Any individual(s) or non-individual(s) applying for units in a mutual fund;

Any individual(s) constituted as Power of Attorney holder(s).

Each of the applicants, in case of an application in joint names; Guardian investing on behalf of a minor.

If an individual becomes an investor due to an operation of law, e.g., transmission of units upon death of an investor, the claimant will be required to be KYC-compliant before such transfer can take place.

Where do I get this form and submit the same?

The KYC Application form and list of POS is available at the AMFI website - http://amfiindia.com/KYC.aspx

Incidentally, one can check the KYC Status at the CVL website http://www.cvlindia.com

IDBI Bank to offer loans against IDBI gold ETF

New Delhi, Oct 20: IDBI Mutual Fund is in talks with five major jewellery houses to enable investors to exchange their IDBI Gold ETF units for gold jewellery, a top official of the fund house has said.

If successful, investors in IDBI Gold ETFs will be able to directly buy physical gold jewellery from a jeweller without having to go to a stock exchange for selling their units.

“Some really big jewellery houses have in principle agreed to take our IDBI Gold ETF units and exchange it for gold jewellery. That will be an additional exit option for our investors in Gold ETF units. We will tie-up the modalities in next few days. We are talking to both large national and also regional players,” Mr Debasish Mallick, Managing Director and Chief Executive Officer, IDBI Asset Management said here on Thursday.

Mr Mallick said that IDBI Mutual Fund wants to enter into tie-ups with multiple jewellers for providing an additional exit option to investors.

Such tie-up would be a win-win arrangement for both the jeweller and the fund house, he said.

Mr Mallick was in the capital to announce the launch of IDBI Gold Exchange Trade Fund (ETF), an open-ended ETF. The New Fund Offer (NFO) has opened for subscription on October 19 and will close on November 2.

IDBI Mutual Fund has tied up with Stock Holding Corporation (250 branches), IDBI Capital Services (400 branches), Lakshmi Vilas Bank (271 branches), Corporation Bank (50 branches) and Federal Bank (50 branches) to sell IDBI Gold ETFs. This product will also be retailed through 800 branches of IDBI Bank across the country, Mr Mallick said.

Both IDBI Bank and Manappuram Finance have agreed to provide loans against IDBI Gold ETF units, he added. IDBI Mutual Fund has no immediate plans to launch Gold Fund of Funds.

NSE clocks four-fold surge in gold ETF trade

The investors interest seems to be growing fast in gold ETFs, as the average daily value of their trade on the National Stock Exchange (NSE) has grown by over four times since the beginning of this fiscal.

The gold ETFs (Exchange Traded Funds) enable investment in the precious metal on the stock exchange platform in an electronic mode and without its purchase in physical form.

As per the NSE data, the daily average trading values in gold ETF have increased by over 400% from a daily average of Rs 18 crore in April to Rs 92 crore in September 2011.

The daily average number of trades has also increased by 300 per cent during this period, from 5,891 average daily trades in April to 23,874 last month.

The gold ETFs track the gold prices and each unit of these ETFs is generally equivalent to one gram of gold.

While the global markets have been in a turmoil over the past one year, and asset classes like stocks giving huge negative returns, the gold prices have rallied smartly.

Tracking the soaring gold prices, the gold ETFs have appreciated by over 30 per cent over the past one year, although the prices have fallen somewhat in past one month.

As the investor interest in the gold grows in the run-up to Dhanteras and Diwali festivals, when it is considered auspicious to invest in gold and other valuable assets, the experts expect the gold ETF trade volumes to rise further in the coming days.

Diwali will be celebrated on October 26, while Dhanteras falls two days before that.

To cash on the festive demand, the NSE has also begun a new media campaign to spread the word about the gold ETFs being a "smart way to buy gold".

Traditionally, Indians have been investing in gold on auspicious days like Akshaya tritiya, Dhanteras and Diwali.

On the day of Akshaya Tritiya on May 6 this year, the NSE recorded a record trade of 20 lakh units of gold ETFs worth Rs 423 crore.

A total of 11 gold ETFs are listed on the NSE and their monthly trading value has grown to Rs 1,936 crore as on September 2011, as against Rs 356 crore in January this year.

The total assets under management in gold ETFs have more than doubled in the past one year, while it has grown by over five-times in two years.

As per the latest available data, the total assets of the gold ETFs stood at Rs 6,119 crore at the end of July 2011.

The number of investor accounts for gold ETFs has also grown to nearly four lakh, from little over one lakh accounts in September 2009.

Source: Business Standard

Is your investment portfolio delivering good returns?

Some investors believe returns generated by their portfolios are sole measurements of performance . No doubt returns are critical, but there are other factors that must be considered when evaluating your portfolio too.

Here are some:

Risk

Risk and reward are two sides of a coin. The more the risk, greater will be the reward. A portfolio that is heavily invested in small little-known companies may be delivering high returns. However, it may be risky as its returns may not be consistent .

Time horizon

When calculating investment returns, flows during the relevant period must be considered. The investment's time horizon could range from a month to a few years.

Market price

When computing gains and loss all securities must be considered at their market prices. This way, fairly accurate investment returns are reflected across the securities.

Determine a benchmark

When measuring a portfolio's performance, it is essential to have a benchmark that truly reflects the objectives of the portfolio that is being evaluated. The benchmark index or portfolio helps compare returns obtained from a fund with the returns that could have been obtained from an index or a benchmark.

Diversification

A well-diversified portfolio may have lesser risk associated with it. It may be less volatile and yielding consistent returns. The extent of portfolio diversification should also be considered when measuring portfolio performance.

The Sharpe ratio evaluates a portfolio based on the rate of returns and extent of diversification. It uses the standard deviation of returns as a measure of risk. The ratio has the ability to judge if the performance of a portfolio is due to excessive risk exposure or good investment strategy.

The ratio of average rate of returns from a portfolio minus the average rate of returns from risk-free assets during the same time, and the standard deviation for the portfolio, gives the Sharpe ratio. Sharpe ratio is therefore equal to (expected portfolio returns minus risk-free returns) divided by the portfolio's standard deviation.

The Sharpe ratio's measurement of a portfolio's returns is useful to determine if higher returns have come with excessively increased risk. The greater a portfolio's Sharpe ratio, the better is its risk-adjusted performance.

Another measure that can be used to evaluate a portfolio is the Treynor measure. The Treynor measure is also known as the reward-to-volatility ratio. Treynor ratio is equal to (portfolio's returns minus risk-free returns) divided by beta. The higher the Treynor ratio, the better is the performance of the portfolio under analysis.

There are many more measures for evaluating a portfolio's performance like the Jensen's alpha method. Quantifying and measuring both risk and rewards will help give a more accurate picture of your portfolio performance.

Source: EconomicTimes

HDFC Mutual Fund launches Gold Fund

New Delhi: Country's largest fund house HDFC Mutual Fund today launched HDFC Gold Fund, which will enable investors to put money systematically in gold.

HDFC Gold Fund (HGF), an open ended Fund-of-Funds scheme, would enable investors to invest systematically in gold, hedge their risks against market volatility and to effectively diversify their portfolio, it said in a statement.

The new fund offer (NFO), which opened today, will close on October 21. A Fund-of-Funds (FoF) scheme usually invests in other schemes of the mutual fund.

Gold FoFs enables the investors to invest through a single investment or through Systematic Investment Plan (SIP).

The minimum denomination of investment is Rs 100, the statement added.

The corpus collected through the NFO would be invested in HDFC GETF (HDFC Gold ETF) to seek capital appreciation.

As at the end of September quarter, HDFC MF managed average assets worth Rs 91,827.11 crore.

Source: Financial Express