To ensure that all schemes launched by mutual funds are distinct in terms of asset allocation and investment strategy, SEBI proposed categorisation and rationalisation of mutual fund schemes.
Nikhil Walavalkar | Mar 16, 2018 02:24 PM IST | Source: Moneycontrol.com
Mutual funds are busy changing the names of their schemes. Securities Exchange Board of India’s (Sebi) directive on the rationalisation and categorisation of mutual fund schemes has made mutual funds to drop the fancy names and fall in line. The idea is to simplify the process of understanding the mutual fund offerings and choosing schemes for investments by investors. But as the names change, there are some investors who may start worrying about their investments. If the investment you have invested into has disappeared or renamed do not get worked up. Do read on to understand how it impacts you.
To ensure that all schemes launched by mutual funds are distinct in terms of asset allocation and investment strategy, SEBI proposed categorisation and rationalisation of mutual fund schemes. The SEBI prescription allows fund houses to offer schemes in 10 types of equity funds, 16 categories of bond funds and 6 categories of hybrid funds. Fund houses are also allowed to launch index funds, fund of funds and solution oriented schemes.
“SEBI has clearly defined norms and the asset allocation and the norms that will specify each category,” says Rupesh Bhansali, head of mutual funds, GEPL Capital. For example, a large cap fund must invest at least 80% of the money in large cap stocks. Large cap stocks are defined as top 100 companies in terms of full market capitalisation. “By introducing these norms the regulator has ensured that the apple to apple comparison of mutual fund schemes is possible,” says Bhansali.
The mutual fund houses too have started responding with change in names and investment strategy of the schemes, wherever applicable. For example, DSP Blackrock Focus 25 Fund is renamed as DSP Blackrock Focus Fund. Analysts used to treat it as a large cap fund so far. However, going ahead it will be placed in Focused Fund category.
The process of aligning with the SEBI norms will go on for a while and more fund houses will make necessary changes. The process however should not stop you from investing in mutual funds.
“Investors should first understand the category of mutual funds as each one of these has distinct characteristics,” says Swarup Mohanty, CEO of Mirae Asset Mutual Fund. Find out where your scheme is going to be placed and see what kind of investment strategy it will employ.
“If the scheme’s investment strategy and portfolio construction changes, then there is a very high possibility of changes in risks and returns associated with investing in that scheme,” Renu Pothen, head of research, FundSuperMart.com. For example, if a fund that was a primarily large cap scheme is shifted to a large and mid-cap scheme, then the risk associated with the scheme goes up as the fund manager invests minimum 35% of the money in mid cap companies. Possible higher returns come on the back of higher risks.
“The investor must assess the risk-reward in the light of his financial goals and his risk appetite before investing in that scheme. If there is a mismatch between the investor’s risk profile and the risk-reward offered by the scheme, the investor will be better off selling out his existing investments. He can look for better options elsewhere,” says Renu Pothen. While exiting a mutual fund scheme, there are implications such as exit loads and capital gains, which investors should not ignore.
“When there is a change in fundamental attribute of the scheme, the investors are given exit option without any exit load,” points out Bhansali. This exit option is not at all compulsory and should be availed if and only if there is a mismatch between your expectations and the offering. However, the capital gains will be payable in case of redemption in bond funds. Though the exits in current financial year from equity funds will lead to no tax on long term capital gains, the same will attract 10% tax after April 1, in case the gains exceed Rs 1 lakh.
Changes in regulatory framework and volatile markets may add to worries of mutual fund investors. However, mutual fund investors must take this opportunity to relook at their investment plans, say experts. If you do not understand the fine nuances of equity funds, better stick to multicap funds and let the fund manager decide what asset allocation should be within equity as an asset class.
“It is time to reassess your risk profile. Do not get carried away with high returns over last couple of years. Instead be realistic with your return expectation while building your financial plans and use short term volatility to your advantage by investing through systematic investment plan,” advises Mohanty.
The business leader said said investing in mutual funds should be as easy as buying smartphones on Internet.
PTI | MUMBAI, JUN 29, 2017 | The Hindu Business Line
Urging regulator Securities and Exchange Board of India (SEBI) to simplify investment and advertisement norms for mutual funds, business leader Anil Ambani today said investing in them should be as easy as buying smartphones on Internet.
He said only one in 25 Indians invests in these products at present, but the investor base can be expanded 10-fold to 60 crore in five years. “India’s mutual fund industry is today poised for its Jan Dhan moment,” Ambani said here at an event of the Association of Mutual Funds in India (AMFI).
Reeling out figures, the Reliance Group chief said while 9 out of 10 Indians have a mobile connection and 3 out of 10 have a smartphone, only 1 in 25 Indians has an investment in a mutual fund. “The comparisons in a global context are even more staggering. There are as many as 58 asset management companies in the world which manage more money than India’s entire MF industry put together,” said Ambani whose group firm Reliance Capital runs one of the biggest fund houses of the country.
He said India’s mutual fund industry is a relatively young industry. “In fact, I would claim it has barely moved out of its teens!” he added.
Recalling that the erstwhile UTI started India’s first mutual fund way back in 1964, Ambani said no private player was there for the next 30 years. “And it is fitting that the man who is widely regarded as the father of capital markets and the equity cult in India — my late visionary father, Dhirubhai Ambani — was among the first to sense the potential that lay ahead.
“We at Reliance, together with my late brother-in-law, Shyam Kothari, shared the exclusive privilege of launching India’s first-ever private sector mutual fund in 1993 — Kothari Pioneer Mutual Fund. Our own offering followed soon afterwards with the launch of Reliance Mutual Fund in 1995,” he said.
“From an AUM of under Rs. 60 crore in 1995, and Rs. 2,200 crore in 2002, we have grown our asset base over 100 times to reach Rs. 2.25 lakh crore. As an AMC, we currently manage Rs. 3.58 lakh crore. In the same timeframe, India’s mutual fund industry, with 5.7 crore individual accounts, has expanded its AUM to reach Rs. 20 lakh crore,” Ambani said.
The industrialist said SEBI has historically played a hugely important and proactive role in the development of the capital markets while safeguarding the interest of the small investor. “It is to our regulator’s immense credit that India is today widely perceived as among the most efficiently run markets in the developing world.
“Going forward, we in the industry need to work closely with you (SEBI) to further simplify the on-boarding process for new investors,” Ambani said while suggesting some steps for the the next 100 days.
His suggestions included making MF investment even simpler, allowing anyone with a legitimate bank account to invest in financial products since their bank KYC is already in place and ensuring better utilisation of technology to improve penetration and facilitate faster transactions.
He also urged SEBI to simplify advertising norms to help communicate the value proposition of mutual funds better. “These steps will bring in a new class of investors to the mutual fund industry,” he added.
Ambani urged the industry to give the nation an increase in the number of individual investor folios from 6 crore currently to 60 crore in five years when India will celebrate 75 years of Independence.
He also termed the GST (Goods and Services Tax) as India’s ‘economic freedom’ while noting that it would make “a borderless world of 1.3 billion people — producers and consumers engaged in a seamless exchange of goods and services, skill sets and capital, labour and ideas”.
He said the world has seen nothing like this before as “in less than 48 hours, India will emerge as the biggest free and democratic market in the history of humankind”.
“In tandem with its policy precursor — demonetisation — GST will forever change the ground rules of doing any kind of trade, commerce or business in India,” he added.
(This article was published on June 29, 2017)
Source : https://goo.gl/z2jxjo
Households are putting more money into financial assets as slowing inflation reduces the value of gold
Rajhkumar K Shaaw and Santanu Chakraborty | Tue, Oct 04 2016. 07 19 PM IST | LiveMint
Mumbai: Indian investors are shifting savings into stocks like never before.
Mutual funds showed net buying of shares for a record 10th straight quarter in September, data from Bloomberg show. Households are putting more money into financial assets as slowing inflation reduces the value of gold, a traditional favourite.
Shibabrota Konar exemplifies the shift. He’s stopped buying exchange-traded funds backed by gold and now invests at least 15,000 rupees ($225) a month into stock funds. A jump in industry-wide accounts to a record 50 million at the end of August show he’s not alone.
“Gold has eroded wealth in the past three years, while stocks have taken off,” says Konar, a 43-year-old telecom engineer who lives in Mumbai. “Equity funds offer the best way to create long-term wealth. And I can invest in small amounts.”
Retail investors like Konar have been the main contributors to mutual funds’ growth since Prime Minister Narendra Modi took office in May 2014 with the biggest mandate in three decades. Assets with money managers swelled to an unprecedented 16 trillion rupees ($241 billion) in August, with stock plans making up 32% of the pie. The proportion was 20% in April 2014, data from the Association of Mutual Funds in India show.
Analysts cite several reasons for the trend:
The gush of money into funds has sent the nation’s small- and mid-cap stocks to a record, while providing companies with a growing pool of capital to tap for their initial share sales and helping the market weather events such as the U.K. vote to leave the European Union. Early signs suggest investors are looking past last week’s military offensive too. The S&P BSE Sensex has risen 1.7% in two days, recouping more than half of last week’s 2.8% tumble spurred by India’s attacks on Pakistan terrorist camps.
Optimism that slowing inflation may prompt the central bank to lower borrowing costs from a five-year low is also pulling investors toward stocks, says Mirae Asset Global Investments (India) Pvt. The new central bank governor Urjit Patel led a united monetary policy panel to cut interest rates at its first review on Tuesday. The Sensex closed with a third day of gains after the policy decision.
“It’s time to back up the truck for stocks,” said Gopal Agrawal, chief investment officer at Mirae Asset, which manages $600 million. “The migration to moderate-risk equity products like mutual funds is growing at a phenomenal pace because of their relative attractiveness” over alternatives such as bank deposits, he said.
Equity funds have attracted 1.63 trillion rupees from April 2014 through August this year, according to AMFI data. That’s more than the 934 billion rupees that Deutsche Bank AG estimates funds got between January 2002 and April 2014.
The market benefits from a regular stream of money flowing from savers setting aside a fixed amount every month as part of their mutual fund investment plan. The industry takes in 35 billion rupees monthly from 11 million investors aiming to smooth out market swings through averaging, according to AMFI.
“People have begun to invest with maturity,” said Nilesh Shah, chief executive officer of Kotak Mahindra Asset Management Co. The Mumbai-based money manager, which has $9.5 billion in assets, got new inflows on Thursday when the financial markets were jolted after the nation announced it attacked terrorist camps in Pakistan.
Demographic trends are also helping, said Navneet Munot, chief investment officer at SBI Funds Management Pvt., which has $18 billion in assets.
“The bulk of our population is under 35 years of age and this generation has a much higher risk appetite,” he said. “The millennials will drive the equity boom over the next five years.”
The optimism among Indian investors contrasts with skepticism from savers elsewhere. Inflows into Japan’s stock funds fell in July to the lowest since November 2012, and stayed near that level in August, data from the Investment Trusts Association in Japan show. Almost $90 billion was pulled from US mutual and exchange-traded funds for the year through August, even as the S&P 500 Index gained almost 20% from a February low, according to data compiled by Investment Company Institute and Bloomberg.
Indian families will probably buy $300 billion of equities in the next decade, six times as much as they did in the past decade, Morgan Stanley said in a May 2015 report.
“You will be surprised with the amount of money that will come into the markets over the next three to five years,” Anand Shah, the chief investment officer at BNP Paribas Asset Management India Pvt., said in an interview in Mumbai. “The incentive to buy real estate and gold is diminishing by the day.” Bloomberg
Deepti Bhaskaran|Kayezad E. Adajania|Vivina Vishwanathan|First Published: Fri, Jun 14 2013. 07 08 PM IST| Livemint.com|
As you climb the stairs of Parisrama Bhavan in Basheer Bagh to reach the Insurance Regulatory and Development Authority (Irda) office in Hyderabad, you are greeted by a billboard in the stairwell that asks: Is your insurance company listening to you? If not, the billboard goes on, you can register your complaints online and track their status through Integrated Grievance Management System, IGMS, or call at 155255.
This in fact is the first board you see before you enter the office. Its placement is indicative of the regulator’s focus and its effort to reach out to aggrieved customers directly. And Irda is not alone in this regard. Capital markets regulator Securities and Exchange Board of India, Sebi, too has taken some institutional measures in the form of Sebi Complaints Redress System or SCORES to effect speedy disposal of complaints. In fact, SCORES is a step ahead because it also claims that it adjudicates on a case to case basis to ensure fair settlement. The mandate for IGMS, however, is to ensure speedy settlement of complaints and not adjudication. This is true even for the Standardised Public Grievance Redress System or SPGRS, that the ministry of finance has put in place only for the public sector banks (PSBs) for now.
With regulators taking a keen interest, consumer grievance management seems to be getting institutionalized and companies are beginning to create dedicated departments to have a focused approach towards consumer complaints. But given the fact that it’s still early days and the systems are yet to become popular, it maybe too early to judge their efficacy. But if the regulators are using the help of technology to reach out to you, you should also know how to reach out to them with your complaints. Read on to understand the processes of consumer grievance redressal set up recently in the financial sector.
Capital markets and mutual funds
Sebi set up SCORES in June 2011. So if you have a grievance with your investments that come under Sebi’s jurisdiction, such as mutual funds (MF), equity shares, depository participants (DP) and brokers, you can complain directly to Sebi through SCORES.
Visit Sebi’s website (www.sebi.gov.in) or http://www.scores.gov.in, fill in your basic details like your name, address, email id, register your complaint, submit any documents that you may have as evidence and sit back. Sebi, then, forwards your complaint to the firm and keeps a track of it. You could, alternatively, send your complaint to Sebi by post.
To ensure that the company against whom the complaint is filed actually receives the complaint, Sebi has made it mandatory for every listed company, MF, stock exchange, depository and so on, to nominate one person in charge of investor complaints. When Sebi gets a complaint, it sends an alert message to this official within seven days; he is then mandated to look into it. Though Sebi has not specified a fixed time limit within which the firm must respond, it mandates the company to send its first response within seven days of receiving the complaint and then about another 30 days generally to resolve the complaint. If the firm fails to respond, Sebi sends one to two reminders to the firm. If you have submitted the complaint online (on Sebi’s website), your firm will email you the response and will also update Sebi. If you complain by post, the firm sends you its reply by post, and it is mandated to mark a copy to Sebi.
If you are unhappy with the company’s response, you can go back to Sebi and tell them to take a relook at it. Further, there have been instances where Sebi, on its part, is not particularly satisfied with the firm’s response. In such cases, Sebi gets back to the company itself. “There was an instance where the investor did not get dividends for the shares he held of a bank. When the firm said that it sent duplicate dividend warrants, we got back to the company and told them to send this investor, two more reminders with a gap of seven days. We did this to ensure that if an investor misses one response from the company, the follow-up reminders should catch his attention,” says a senior Sebi official who did not want to be named.
Wait for about 30 days after you complain. If you don’t hear anything, you can quote your Unique Complaint Registration Number (UCRN)—a number you get after you first lodge your complaint on Sebi’s website—and send Sebi a reminder. Sebi penalizes those who fail to respond. The penalty varies and is subject to Sebi’s decision. Such actions taken against firms are also periodically listed on Sebi’s website here (http://tinyurl.com/mblgx3n).
While Sebi claims that its process is robust, an investor association we spoke to, is not impressed. “Over all it is very unsatisfactory. There are areas of concern. Firstly, the communication between Sebi and the complainant, after the complaint has been filed, is absent. At best, the investor gets a response “in process” when he gets in touch with Sebi to check the progress, but that sort of reply is not enough. These are automated responses and don’t mean much. Secondly, if grievances are just not resolved, despite Sebi’s intervention, nobody knows what happens to such complaints. In such cases, where Sebi can’t can’t do anything, they still should be able to take some action. Which they don’t do. I raised this query and asked them what they do in such cases. They didn’t have any answer to that,” says Virendra Jain, founder and president, Midas Touch Investors Association.
IGMS was set up by Irda in 2011. It works like a central repository of all the consumer complaints received by life insurance and non-life insurance firms. In that sense it’s a handshake between Irda’s grievance management system and the insurer’s individual grievance management system. The way it works is like this. You can register a complaint either through mail, phone or even verbally with an insurance company and the insurer will register that complaint in its grievance management system. In fact it is mandated that every insurer must have a grievance redressal policy approved by Irda and a grievance cell that will be presided over by a nominated person from the board.
Once your complaint gets registered, it will automatically flow in the IGMS which is monitored by Irda. Irda gives the insurer 15 days to settle the complaint. “Regardless of the nature of grievance, insurers have 15 days to settle the matter. However, 15 days start from the day of receiving all the necessary documents and proof,” says Yateesh Srivastava, chief operating officer, Aegon Religare Life Insurance Co. Ltd. If your complaint is not settled within 15 days, the system will raise a red flag so that Irda can take note of the delay and direct the insurer to settle the complaint. You can also approach IGMS by logging into http://www.igms.irda.gov.in or calling up the toll free number 155255. However, Irda encourages you to approach the insurer first.
The mandate of IGMS is restrictive because through it, Irda does not adjudicate on individual complaints. The basic idea of IGMS is to effect speedy disposal of complaints and have a repository that would help Irda track the nature of complaints in order to make systemic corrections. “We used to submit data on complaints even earlier but it was post-facto. So, the idea of IGMS was to track complaints and the effectiveness and timeliness of response on a real time basis. The regulator, however, depending upon the trends that complaints throw up, can always question the insurer,” says T.R. Ramachandran, CEO and managing director, Aviva Life Insurance Co. India Ltd.
In other words, Irda could go beyond the mandate. “Even as the regulator’s role remains directive, it can track complaints and even penalize the insurer for a glaring mistake,” says Srivastava. Irda also publishes data on complaints on its consumer awareness website http://www.policyholder.gov.in. According to this website, Irda in FY12 logged in about a lakh complaints on unfair business practice in the life insurance industry. This is 32% of all the complaints received. Irda on its website, http://www.irda.gov.in, also warns companies who violate regulations to fall in line. For instance in March, based on various compliants, Irda issued 15 warnings to Oriental General Insurance Co. Ltd and National Insurance Co. Ltd.
The industry feels that IGMS has led to speedy disposal of complaints. However, some feel more needs to be done. “Customer complaints are definitely being taken more seriously since Irda has a constant watch but what action the insurer takes is still work in progress. Irda should also think about taking action on complaints because approaching the ombudsman is very time consuming and they are short staffed,” says Kapil Mehta, founder, Securenow.in.
So if you want arbitration on the complaint, you will still need to go to the insurance ombudsman. Ombudsman are divided according to the regions and you will need to approach the one in your area. The verdict of the ombudsman is usually binding on the insurers and the ombudsman is supposed to issue a verdict within three months from the receipt of the complaint.
Except for PSBs, the banking sector lacks a similar integrated redressal system. In case of the PSBs, the department of financial services under the ministry of finance has put in place an online complaint redressal facility and inked guidelines on SPGRS last year. This SPGRS forms needs to be uploaded on the website of the PSBs. For instance, in the Bank of Baroda website you can find the form at http://tinyurl.com/kda93kl.
The idea was to meet the rising expectations of customers for prompt redress of their grievances. This system again works like a repository in the sense it integrates complaints received from multiple channels into a common digital platform. The bank in question is expected to solve grievances within three weeks or 21 days. The system has an inbuilt management information system for analysing performance. Says V.N. Kulkarni, chief counsellor, Abhay Credit Counselling Centre, “The SPGRS is one of the new ways to send complaints. However, the issue of resolving consumer complaints faster still remains. The move is in the right direction, but number of days to resolve the grievance should have been reduced further.” He adds that, “Only banking related issues can be addressed through the existing system. For complaints related to third party products such as insurance and MFs sold through a bank, you will have to approach the respective industry and regulators. This is because banks only acts as an agent while selling the third party products.” SPGRS is still being introduced in the banking system. We will have to wait and watch to see how it works out. You should remember that if the grievance is not solved via SPGRS, you can then approach the banking ombudsman.
Banking ombudsman is one of the last recourses to address banking related complaints. The ombudsman will look into complaints against all banks. As a customer you can approach the ombudsman only after he has exhausted all the options of customer redressal services of his bank in 30 days. For approaching the banking ombudsman, you need to first check under which jurisdiction you fall (see http://tinyurl.com/aqkhmwc). Usually, the banking ombudsman gives ruling within 30 days. If you are not satisfied with the ruling of the banking ombudsman and you have been unable to get your money back, the next thing is to approach the appellate authority, who is Reserve Bank of India’s deputy governor; currently, K.C. Chakrabarty.
The second layer of consumer redress is being put in place, although with some restrictions, but it seems like it still has to cover some ground. You as a customer should, however, actively make use of these systems to get your complaints settled in a timely manner.
Source : http://goo.gl/7Gdli