Category: Product Of the Week | POW

POW :: ICICI Prudential Indo Asia Equity Fund – a review

Nikhil Walavalkar | May 05, 2015, 05.48 PM IST | Source: Moneycontrol.com
Equity investors looking for a solution that invests in both- shares listed in Asia and India with three years time-frame, can consider this scheme as an investment

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As Indian equities come under pressure and foreign institutional investors start logging out of India in search of value, the schemes investing overseas appear attractive. But not many individuals can time this move from Indian equities to foreign equities. Also lack of awareness about foreign markets is another challenge for many. Hence it makes sense to go with a scheme that offers to invest in Indian shares as well as shares listed overseas. If such a scheme comes with a good track record, it is a good investment pick. ICICI Prudential Indo Asia Equity Fund (IPIA) fits the bill and can be looked at as a core portfolio holding with a minimum three years view – longer the better.

The scheme
IPIA was launched in October 2007. As on March 31, it has an asset size of Rs 151 crore. The scheme is benchmarked against 65% CNX Nifty + 35% MSCI Asia ex-Japan Index. Sankaran Naren, Atul Patel and Shalya Shah are the fund managers of this scheme.

Asset allocation
The fund intends to invest 65% to 95% of the money in shares listed in India. Up to 35% money can be invested in Asia Equity Fund.

Portfolio composition
IPIA sticks to fund route when it comes to taking ‘Asia’ exposure. As of March 31, 25% money was invested in Eastspring Inv Asian Equity Fund. Remaining money is invested in Indian shares along with 2.7% exposure to short term debt and other current assets. Banking and finance, services and automobiles are the top three sectors with 26.18%, 10.24% and 9.08% respectively. These three sectors account for 45.5% of the scheme. There are 21 stocks in Indian stock portfolio. Hence the portfolio can be termed as concentrated portfolio if compared with other portfolios of the fund house and the industry average.

Investment strategy
Fund managers have built a portfolio that offers exposure to companies of varying sizes. Though this is a concentrated portfolio, sector diversification and focus on quality ensures that investors are not taking undue risks. The fund managers avoid taking exposure to companies that come with highly leveraged balance sheets. Fund managers believe in continuing their Asia exposure as long as they find it attractive.

Performance of the scheme
Over three and five year time period IPIA has given 26.6% and 17.7% returns respectively. The fund has beaten the category average for international funds and Nifty by a good margin. Do refer table for better understanding of the performance numbers.

ICICI Pru Indo Asia Fund

Source: Moneycontrol.com / All numbers are annualized.

Returns (%)
The scheme did well compared to peers.

ICICI Pru Indo Asia Fund

Source: Moneycontrol.com /All numbers are annualized.

Scheme has done well across time periods. IPIA also managed to contain downside in bad times like CY2011, when it lost 15.05% as compared to 24.62% loss in Nifty. The scheme is not solely dependent on Indian markets. This diversification has helped the fund post better risk-adjusted returns in the long term.

Risks
As this scheme invests in shares, it must be seen as a high risk investment. Exposure to mid-sized and small sized companies may cause some intermittent volatility due to concentrated bets the fund managers have taken. Sudden fall in stock markets across Asia can lead to loss of capital in this scheme. Also the scheme can underperform broader Indian equity markets in case of euphoric up-move in very short time period.

Should you invest?
For investors keen to take a three year view on Indian equities and looking for some amount of diversification beyond Indian equities, this can be a good investment vehicle. IPIA is treated like an equity fund for the tax purpose as it invests minimum 65% of money in Indian equities. If you hold on to the investments in this scheme for more than one year, capital gains earned on this scheme are tax exempt. It is better to invest through systematic investment plan to benefit from stock market volatility.

Source : http://goo.gl/pw3cfj

POW :: Product Crack: JPMorgan India Economic Resurgence Fund

Kayezad E. Adajania | First Published: Tue, Jan 13 2015. 07 35 PM IST | Live MInt
It will invest in companies and sectors across market capitalizations
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The potential of rising economy and equity markets are leading more fund houses to launch new schemes that aim to start from scratch. JPMorgan Asset Management (India) Co. Pvt. Ltd has launched a new scheme called JPMorgan India Economic Resurgence Fund (JER).

What does it do?
JER is an open-ended fund. It will invest in companies and sectors across market capitalizations. The fund aims to invest in companies that it feels would benefit from the introduction of policies and scaling up of the reforms process that the central government aims to undertake in the next few years, including goods and services tax, labour reforms, liberalizing foreign direct investment, building of roads and infrastructure, and so on.

What works…
JER will be aggressively managed compared with the other multi-cap scheme in its bouquet, JPMorgan India Equity Fund. It will be a benchmark agnostic scheme, which means that it won’t necessarily follow the sectoral allocation of its benchmark index, despite having an index as per regulatory requirements. The fund manager may feel bullish about a particular sector, and would be free to allocate more money in that sector, even if the said sector has a modest or low exposure in the benchmark index. In rising markets, this strategy works if the fund manager’s calculations turn out to be right. But if they are wrong, the fund could be affected badly.

The fund house has been steadily building a good track record. After a tough first couple of years, its large-cap-oriented and mid-cap schemes have done well consistently.

…what doesn’t
JER suffers from the same malady that most new fund offers (NFO) suffer from, i.e., lack of track record. Although the fund manager says it would be managed aggressively and a few sectors would be dominant in this portfolio, we need to watch out for the scheme ending up with a long tail. A long tail in mutual funds parlance refers to a scheme having numerous stocks with small or negligible holdings, to lower the risk profile. Of course, how long a fund’s tail should be is subjective; it could be a deliberate strategy and some fund managers play it well. But if JER promises to be aggressively managed, it’s best to first see some evidence of aggression and how it differentiates itself.

What should you do?
JER is not going to follow a focused approach in terms of stocks. Its sectoral allocation could be concentrated but not its stock holdings. Hence, it remains to be seen if, in the name of risk control measures, the fund manager plays safe, or actually takes the aggressive approach as promised. JER is an open-ended fund, so you would be able to invest in it in the future as well. Avoid putting money in JER till the fund accumulates some track record.

Source : http://goo.gl/xX5WcT

POW :: Multi-asset funds make sense only for long term

If you can re-balance your portfolio once a year, separate equity and debt funds are better
Priya Nair  |  Mumbai | November 12, 2014 Last Updated at 21:59 IST | Business Standard
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It’s raining returns on mutual fund investors with both equity and debt funds seeing good growth. In a bid to take advantage of this, fund houses are launching funds that invest across asset classes: equity, debt and gold. But should investors go for such funds or is it better to invest separately in equity and debt funds? Franklin Templeton India’s Multi-Asset Solution Fund’s new offer closes on November 21. The fund will invest in existing schemes of Franklin Templeton and ETFs.

“We believe investors need to stay invested across asset classes at all points in time, irrespective of whether one asset class is doing well or not. To this extent, there is no sanctity behind timing a multi-asset fund now. Those investors who can do an occasional re-balancing, say annually, might as well hold separate equity and income funds, says Vidya Bala, head of mutual fund research, FundsIndia.com.

A pure equity or a pure fixed income fund may give better returns if seen from one point to another. But in a portfolio, investors need dynamic allocation and they should be able to move between asset classes smoothly. A multi-asset fund will allow this automatically, says Harshendu Bindal, president, Franklin Templeton Investments (India).

For retail investors, re-balancing portfolios, that is, shifting from equity to debt funds will involve transaction costs and can also be time consuming. But investing in a multi-asset fund can give diversification across asset classes and automatic asset re-balancing with exposure to a single fund. “But the disadvantage is that they are mostly fund of funds and, hence, receive only debt status for tax purposes and not too tax efficient,” says Bala. This means that if you stay invested for three years, you will be taxed 20 per cent with indexation. Unlike this, in a pure equity fund, there is no tax after one year. The expense ratio, too, could be higher due to the fund of fund structure, since expenses will be over and above the expenses charged by the underlying schemes.

Another disadvantage is that being a fund of fund, only funds from the same fund house will be available. Hence, the best fund in each category or asset class may be lost, Bala adds.

Explaining the rationale behind investing in gold in the current market Bindal says gold is a traditional hedge against inflation, which is useful given India’s high inflation rates.

R Sivakumar, head-fixed income, Axis Mutual Fund says that multi-asset funds are meant for long-term investors, who are not investing in a particular asset because of the cyclical returns from that asset. “In any asset allocation pattern, you will always have a certain amount in all assets. The advantage of doing this through a fund is that fund will always sell the asset that is over-performing and buy the asset that is under-performing,” he says.

According to data provided by Value Research, Axis Triple Advantage Fund, which invests in equity, debt and gold is the largest fund in this category with assets under management of over Rs 500 crore. It has given returns of 14.64 per cent over one-year period. The fund invests in direct equities and fixed income and in gold exchange-traded funds.

Some other multi-asset funds are Canara Robeco InDiGo, which has given returns of 1.06 per cent over one-year, Birla Sun Life Financial Planning (Aggressive Plan) – 39.46 per cent and Union KBC Asset Allocation Fund Moderate Plan – 15.62 per cent.

Ideally, such funds should have a minimum investment horizon of at least three years. Investors can have a multi-asset fund for the base asset allocation and use separate equity and diversified funds for incremental investment, Sivakumar adds.

Source : http://goo.gl/mcN848

POW :: Mutual fund scheme for Indian expatriates

BY A. E. JAMES | SEPTEMBER 14, 2014 , 6 : 37 PM GST | Times of Oman
Ramesh Krishnamurthy, head, Middle East and Africa Region, Sundaram Asset Management Company, said that the close-ended scheme is open for subscription from September 10 to 24 and QBG Geojit Securities will assist NRIs interested in applying for the scheme from Oman. 

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Muscat: Sundaram Asset Management Company has launched a close-ended mutual fund scheme, which is available for non-resident Indian (NRI) investors based in Oman.

The new mutual fund — Select Micro Cap Series VI — is for a 42-month period and as much as 75 per cent of the corpus fund will be invested in Indian growth stocks. `

The fund will focus on capital appreciation by investing predominantly in equity/equity-related instruments of companies that can be termed as micro-caps.

A company whose market capitalisation is equal to or lower than that of the 301st stock by market cap on the National Stock Exchange (NSE) at the time of investment will be considered to be in micro-cap category, said Ramesh Krishnamurthy, head, Middle East and Africa Region, Sundaram Asset Management Company, while making a presentation on the mutual fund scheme as well as the economic outlook of India, which was organised by QBG Geojit Securities recently.

Investing in equities
The close-ended scheme is open for subscription from September 10 to 24 and QBG Geojit Securities will assist NRIs interested in applying for the scheme from the Sultanates of Oman.

As far as the asset allocation is concerned, Krishnamurthy said a minimum of 65 per cent will be invested in micro-cap companies, 35 per cent in other equity and equity-related securities, fixed income securities and money market instruments.

Krishnamurthy said the investor-friendly policies of the new Indian government, which completed more than three months, have already started generating results. The government is focused on developing infrastructure, which will support growth.

He said the uncertainties that haunted the market in the past are not there. “Japan, France and China are keen to invest in India. Rest of the world is rushing to India and we should also be part of the growth process.”

The fund’s corpus money will be invested in industries that are going to benefit from these investments.

The recent easing of crude oil prices is beneficial for Indian economy, he said, adding that the deficit in balance sheet will come down as the country imports 75 per cent of its local demand.

Ramesh Krishnamurthy also noted that the promising industries of India include tyre, paint and auto ancillaries.

Source: http://goo.gl/CFNG6L

POW :: Only of use in a cash crunch

MEERA SIVA | 31st Aug 2014 | The Hindu Business Line

Bajaj Finance’s new home loan scheme offers an EMI holiday for three months before you have to begin payments

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If you are evaluating loan options for buying a ready-to-occupy home, there is a new choice to consider. Bajaj Finance has come out with a loan product that offers you a three-month holiday before you start paying EMIs.

What’s on offer
Called the ‘3 EMI Holiday’ home loan scheme, you need not make any interest or principal repayments in the first three months after getting the loan. But note that this holiday is not the same as a moratorium, which is typically offered on education loans. Under a moratorium, the interest computations start after a delay. What is different in this scheme is that the interest payments that are due in the first three months are added to the outstanding loan amount. In addition, the loan duration is reduced by three months.

For example, say you avail yourself of a 20-year loan for ₹30 lakh at 11 per cent interest. The EMI under a regular home loan will be ₹30,966. The interest portion for the first three months works out to ₹82,404.

So, under the 3 EMI Holiday scheme, your loan balance will increase by this amount. Accordingly, your EMI dues will be ₹31,928 for 237 months, starting three months after the loan was dispersed.

The loan is not offered for under-construction property and can only be availed of for completed homes. The amount of loan you can avail ranges from ₹25 lakh to ₹15 crore.

Our take
The loan product suits home buyers that have short-term cash flow problems. “The 3 EMI holiday option would ensure that our customers are comfortable during the first three months of their property transaction,” says Deepak Reddy, Senior Vice-President, Mortgages, Bajaj Finance.

But there are a few factors to consider when deciding if the product is suitable for you. First, the interest rates seem to be on the higher side. The interest rate for salaried borrowers ranges between 10.4 per cent and 11 per cent, while the rate for self-employed loan takers is higher at 11-11.75 per cent.

“The rate of interest is a tad higher than the standard loans available from other NBFCs and banks in the current market,” says Sukanya Kumar, Founder & Director, RetailLending.com, a loan advisory firm.

Second, the trade-off for the cash in hand in the first three months of the scheme is higher EMI payments. You need to evaluate if you can handle the higher EMIs. In the example, the EMI increases by nearly ₹1,000. You also pay interest on the ₹82,400 that you did not pay in the first three months. This leads to an additional outflow of ₹52,750 over the life of the loan.

Third, you may also want to consider the tax aspects of the home loan.

The tax benefit on interest payments can be claimed as a deduction under Section 24, with a limit of ₹2 lakh for a self-occupied property. There is no limit on the interest deduction for a home that is rented out.

Interest costs account for the largest share of EMI payments in the initial period of a loan.

So by deferring payments under this particular scheme, your interest payments in the first year are reduced. This may lower the deduction you can claim with respect to interest payments in the first year, bringing down the tax benefit.

(This article was published on August 31, 2014)

Source : http://goo.gl/Ldlihb

POW :: ‘Invest in diversified equity funds to make most of rally’

Financial Express Bureau | Mumbai | Updated: Sep 03 2014, 02:19 IST | The Financial Express
HDFC Top 200, ICICI Prudential Value Discovery Fund and Franklin India Prima Fund are some schemes that investors are looking at.

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With the markets touching new high every day, experts recommend investing in diversified equity funds that are overweight on growth-oriented and cyclical sectors such as infra, automobile, engineering and capital goods. HDFC Top 200, ICICI Prudential Value Discovery Fund and Franklin India Prima Fund are some schemes that investors are looking at.

HDFC Top 200: It is a large-cap fund with a well-defined universe of top 200 companies by the market capitalisation. The fund, one of the flagship schemes of HDFC MF, made a comeback in October last year after struggling since the start of the year. The fund is overweight on sectors such as financial and energy, with more than 30% of its allocation towards the former. A stable government and hopes of a turnaround in the economy gave a boost to the banking stocks in 2014, thereby, yielding better returns on this fund. “It is one of the best-performing funds in this category,” said Hemant Rustagi, CEO, Wiseinvest Advisors.

ICICI Prudential Value Discovery Fund: It is an aggressive mid- and small-cap fund and is suitable for long-term investors. “Those with an investment horizon of seven years or more should invest in this fund as there can be bouts of volatility,” said Rustagi. According to Vidya Bala, head, mutual fund research at Fundsindia.com, the scheme had the right mix of cyclical and growth stocks in its portfolio in March, the month it was recommended by fundsindia.com. However, she says, the good thing about the fund is that it keeps a close eye on valuations, which can prove useful at a time when the markets have run up significantly.

Franklin India Prima Fund: It is a stable non-aggressive fund. In the mid-cap space, it invests at the top end of the market capitalisation spectrum. The less-aggressive stance could mean the fund may at time lose out to aggressive peers in scoring on returns.

Source : http://goo.gl/0W8Dmn

POW :: Franklin India Prima Plus: Invest

BHAVANA ACHARYA | Jan 4, 2014 | Hindu Business Line

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Franklin India Prima Plus, in the past one year, is up around 2 per cent. That’s better than the flat returns logged by its benchmark CNX 500.

The fund also makes only the mid-quartile category of diversified large-cap equity funds in the one-year period. It, however, does not frequently switch sectors and stocks and bases calls on valuations.

 

A strategy of this nature tends to deliver well over the longer term and indeed, Franklin India Prima Plus has delivered well over the past nearly 20 years.

The fund, which has a long history, has seen out many a market cycle well. Its 10-year annual return of 19 per cent beats the approximately 13 per cent delivered by the Nifty, Sensex and CNX 500. It’s also among the best performers in this period.

Strategy and suitability

The fund invests in large-cap stocks (which hold lower risk) with some mid- and small-caps added to pep up returns. Its latest portfolio, for example, has a 19 per cent share of stocks with capitalisation of less than Rs 7,000 crore.

Calls are made based on valuations. The fund has also maintained equity investments above 90 per cent, even during bear markets. This allows it to make the most of subsequent market upswings.

Investors with a moderate risk appetite can invest in the fund. Investors should also be willing to hold the fund for a period of five years or more. The systematic investment route can be used.

Thanks to its buy-and-hold and valuations-based strategy, the fund has seen temporary blips in performance from time to time — in early 2010, mid-2008 and late 2007, for instance. But performance evens out over the long term. On an annual rolling return basis, the fund has done better than the CNX 500 index a good 86 per cent of the time in the past ten years.

Over the one-, three- and five-year periods, Prima Plus has beaten the CNX 500 by two to five percentage points. Even comparing its returns with the narrower BSE 100 – given the fund’s large-cap bias – the fund has done well over the longer term.

The fund is also good at containing downsides. During both the previous market downswings of 2008 and 2011, for example, it lost eight to ten percentage points lesser than its benchmark.

Portfolio

The banking sector has been the top holding in the portfolio for several years, only briefly ceding top spot to sectors, such as FMCG, software, telecom and capital goods.

Calls in this space, apart from the tried-and-trusted ICICI Bank and HDFC Bank, include more offbeat ones, such as Federal Bank, IndusInd Bank and Kotak Mahindra Bank.

With the fund’s tendency towards value picks, holdings in over-heated sectors, such as FMCG have been cut gradually over the past year. It added to software significantly in 2011 and 2013. Holdings in sectors, such as automobiles and pharma, have also been steady over the past few years.

The fund also has a fair share of stocks in sectors such as mining and cement which have been beaten down of late, and could turn around.

(This article was published on January 4, 2014)

Source : http://goo.gl/C8qf1z