KYC must for MF investors from Jan 1

Mutual fund (MF) investors, irrespective of the amount they invest, will have to complete the Know Your Customer (KYC) requirements for all purchases, switches and new systematic investment plan registrations from January 1.

Investors have to submit the KYC form, which is available with fund houses, along with necessary documents at the nearest investor services centre. They have to provide a photocopy of the PAN card , proof of address document and a passport size photograph. Earlier, only resident individual investors making investments above Rs 50,000 were required to complete the KYC formalities.

Fund houses have made arrangements with CDSL Ventures for KYC compliance. On submission of KYC application along with the prescribed documents, a KYC acknowledgement letter will be issued. Investors have to provide the letter for carrying out transactions in MF schemes.

The category of investors who need to comply with the KYC norms also include power of attorney (PoA) holders (for investments done through a PoA), each of the applicants in case of investments in joint names and guardian for investments made on behalf of minors.

Non-individual investors (such as corporates, Hindu undivided families [HUFs], partnerships and trusts) that already have an MF Identification Number (MIN—not valid anymore) and have not provided PAN at the time of obtaining MIN should also complete the KYC formalities mentioned above.

Investors who have already completed KYC formalities should submit a copy of the acknowledgement along with a list of folio numbers. After verification, the status will be updated in records and investors would be able to transact as usual. Applications by investors without valid KYC acknowledgement letter are liable to be rejected from January 1, fund houses said.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/kyc-must-for-mf-investors-from-jan-1/articleshow/7188955.cms

TOP Mutual Funds

                                                       

                                                                       

HDFC Top 200

Launched in November 1996, HDFC Top 200 (HT200) is the largest equity fund in the MF industry with assets of Rs. 9,424.8 crore. But this gentle giant hasn’t compromised its performance and is as nimble as the next fund. With a 10-year return of 31%, HT200 has done well in both the rising as well as falling markets. In 2008, when equity markets fell on the back of global credit crisis, HT200 fell by 45.35% against an average category loss of 51% and 56% by its own benchmark, BSE 200 index. Prashant Jain, its fund manager, has consistently managed this fund since its inception; a rare feat in the industry that has seen several fund managers come and go.

According to the scheme’s mandate, the common holding between its own holdings and that of its benchmark index should be at least 6%. For instance, if Infosys Technologies Ltd constitutes 5% of BSE 200 and 7% of the fund, the common holding is 5%. It’s a mandate that doesn’t hug the benchmark index, but also restricts the risks a typical equity fund can take. Jain tells us that he usually keeps the common holding at a minimum of 60% of the scheme’s total corpus. “Since it doesn’t go too far from the index, it is meant for low risk investors,” adds Jain.

Jain also avoids sitting on cash as he firmly believes that investors give money to fund managers to invest in equity markets and not to sit on cash. It had only between 3% and 5% of its corpus in cash between October 2008 and February 2009 when equity markets hit rock-bottom. Jain likes banking, consumer non-durables and software sectors; in each of these he has increased his exposure throughout 2010. HT200 is a part of Mint50—Mint’s chosen set of 50 schemes that we recommend for fresh investments.

UTI Mastershare

The oldest diversified fund in the industry after US-64, UTI Mastershare was launched in October 1986, when unit-holders used to get its physical certificates, like the old time physical share certificates. But Mastershare is more famous for its annual dividends that the fund has diligently paid, during the Diwali festival. It’s an illusion though; dividends come out of the pockets of investors and your fund’s net asset value (NAV) reduces by a similar margin.

However, that has not deterred much of its 680,000 loyal unitholders who still hold their physical unit certificates. “Even if the fund doesn’t pay dividends, an investor can still withdraw a portion of his investments and use it as dividend. But usually, investors don’t withdraw regularly to substitute for dividends,” says fund manager Swati Kulkarni. She says that though dividends are not guaranteed, they endeavour to pay regular dividends.

Mastershare is a large-cap-oriented fund that invests about 80% of its corpus in large-sized companies. The rest goes to mid-cap companies. In the early days, Mastershare invested in scrips across market capitalization. After the fund house got restructured in 2003, the scheme became focused. Additionally, too many fund managers came and quit. Between 2000 and 2006, four managers were at the helm of this scheme. When Kulkarni took over in December 2006, she trimmed the number of stocks to a more manageable level (presently about 49 scrips against about 80 scrips before) and cut down its exposure to mid-cap companies (about 20% presently against 28% average between 2005 and 2007). According to the fund’s November portfolio, it has 15.6% exposure in mid-cap companies and almost nil in small-sized companies. Its subsequent investments in capital goods space also helped the fund beat the markets in 2007, after Kulkarni took over.

Mastershare’s performance has mostly been subdued. Its 10-year returns stands at 17.83%. However the fund has picked up after Kulkarni has taken charge; in two of the past three years, it outperformed the category average. The fund took a momentary hit in 2009 because Kulkarni misread election results; equity markets shot up by 85% between 9 March 2009 (Sensex level of 8,160) and 5 June 2009 (Sensex level of 15,104). Like many schemes, Mastershare was caught sitting on too much cash (20.48% as of April-end 2009). Once the markets settled on an upswing, the scheme increased its exposure to the banking and information technology (software) sectors, which boded well. The scheme is not built for chart-busting returns, but Kulkarni aims for consistency.

Franklin India Bluechip

After suffering a painful dip in 2007 when it underperformed equity markets as well as a sizeable number of equity funds, Franklin India Bluechip Fund (FIBF) is back. At a corpus size of Rs. 3,326.7 crore, FIBF is one the largest schemes in the large-cap space. What separates FIBF from the rest of the market is its aim to stay true to its label. A large-cap scheme by nature, the fund refuses to stray away from its mandate. According to data available from Value Research, a mutual fund tracking firm, FIBF has consistently invested over 75% in large-cap companies and the rest in large to very large-sized mid-cap companies.



The other thing that FIBF avoids doing is hold cash. Between September 2008, when markets crashed, and March 2009, when it hit a low, FIBF had only 7% of its corpus in cash. Says fund manager Anand Radhakrishnan, senior vice-president and portfolio manager-equity, Franklin Templeton (India) Asset Management Co. Pvt. Ltd: “We don’t try to time the market through cash calls and typically are fully invested as we believe investors coming into equity funds are looking for equity exposure and not for an asset allocation product.”

Since November 2008, the fund’s corpus has grown to Rs. 3,326.76 crore, up from Rs. 1,435.55 crore, a jump of Rs. 1,891.21 crore or 52% compounded annualized. The fund is well diversified; its top 10 holdings consistently account for about 48-50% of its total portfolio. Like most other schemes, FIBF’s top three sectoral allocation includes banking with 19.20% of its total portfolio, chiefly through ICICI Bank Ltd and Kotak Mahindra Bank Ltd; the fund booked profits in HDFC Bank Ltd throughout 2010. It also made money through its investments in Infosys Technologies Ltd, Cummins India Ltd and Crompton Greaves Ltd.

“India remains underserved in terms of financial services, but the strong growth in personal incomes has led to increased demand. Given the low penetration of banking and financial services in India, we believe companies in this sector have good growth potential,” says Radhakrishnan. Large outperformance of banks in 2010 and present valuations—which Radhakrishnan feels are “still reasonable”—do not seem to dither him.

Reliance Vision

A star performer for a good part of the past decade, Reliance Vision Fund (RVF) is one of Reliance Capital Asset Management Ltd’s largest diversified equity funds. Though RVF is a large-cap-oriented fund, it doesn’t hesitate in taking exposure to small and medium-sized companies. In 2010, it has invested approximately 30% of its corpus in small- and medium-sized companies. In 2007, this figure was 38%. “We invest in mid-cap companies with a time horizon of at least two to three years,” says fund manager Ashwani Kumar who has managed this fund since June 2003.



Kumar likes to hold a tight portfolio and hence it’s not hard to spot a bit of sectoral concentration in RVF. With a corpus size of Rs. 3,543.2 crore, the scheme consistently holds about 33-35 stocks in its portfolio. RVF is opportunistic and doesn’t hesitate in frequent churning. It follows in growth style of fund management and holds around 10% on an average in cash. Some of the scheme’s biggest stories in recent times have come from investments in Siemens Ltd, ICICI Bank Ltd and State Bank of India.

Despite being oriented towards growth style, the fund also goes for value picks such as oil refining and marketing companies. The scheme aims to invest in companies within the BSE 100 index to the extent of 80% of its portfolio. For the rest it looks outside BSE 100, such as Coal India Ltd, which recently concluded India’s biggest initial public offering. “Despite venturing BSE 100, we do not diminish the portfolio quality,” says Kumar.

However, after years of outperforming the market, RVF’s recent performance has been subdued. It has managed to return a mere 13.08% so far this year (as on 24 December) against 15% by the category average. Its performance was almost just as much as its benchmark index BSE 100 which returned 12.88% so far. In 2009, around March and April, it got a bit late in deploying cash back in the markets; by the time it reduced its cash levels between May 2009 and August 2009, markets already appreciated.

Templeton India Growth Fund

With a corpus of Rs. 822 crore, this is the smallest of the five schemes we’ve picked. But Templeton India Growth Fund (TIGF) is one of the best and oldest equity funds that practice the “value” philosophy of investing. As against “growth” style of investing that hunts for fast-paced stocks whose share prices continue to rise even in overheated markets, a value stock’s share price grows only after certain events previously anticipated for the company occurs. These stocks typically trade below their true value, and against growth stocks, do not experience above-average growth. Hence, value stocks are typically not chased by a majority of buyers in the stock market; one of the main reasons why a well-managed value fund, such as TIGF, outperforms its peers during falling markets. In 2008 when the multi-cap equity funds on average lost 54%, TIGF lost 51%. Way back in 2000 and 2001 when the category lost 24% and 23%, respectively, TIGF lost just 3% and 7%, respectively, in those years.


“Majority of the investors might blindly shun beaten down or an ignored stock as they don’t expect growth from them and this exacerbates the decline. Investors, who are invested in beaten-down stocks of companies with good medium- to long-term potential, tend to do relatively well than those who had invested in growth stocks, when the markets turn, as they are under owned in the first place,” says Chetan Sehgal, chief investment officer-India, Templeton Emerging Markets Group, Franklin Templeton Asset Management (India) Pvt. Ltd. He’s quick to add, though, that value philosophy doesn’t just mean picking up stocks that are fallen. “They have to be fundamentally valuable; that distinction is crucial”, he says.

That doesn’t mean TIGF is a sitting duck in rising markets. Backed by beaten-down scrips such as Tata Chemicals Ltd, Bharti Airtel Ltd, Reliance Industries Ltd and others, which it accumulated in 2008, TIGF gave 104.7% returns in 2009 once markets started to rise, against the category average of 84.9%. While the Templeton group manages value-oriented schemes, the Franklin group manages growth-oriented schemes. Both groups have a distinct set of fund managers and analysts. The fund house claims that neither knows what the other does—the main reason, as it claims, why their schemes consistently manage to stick to their individual philosophies.

Franklin Templeton MF to Wind up Franklin India International Fund

Franklin Templeton Mutual Fund has announced to wind down Franklin India International Fund (FINTF). The scheme will stand wound down as on 30 April 2010. The major reason for it is strengthening of Indian Rupee against the US Dollar since the scheme's launch together with the scheme's performance profile resulted in a sharp reduction in demand for FINTF. Hence, as part of the ongoing product rationalization exercise, the scheme will be wound down.


Accordingly from 22 April 2010 the Trustee and the Asset Management Company shall cease to carry on any business activities in respect of scheme so wound up, create or cancel units in the scheme and issue & redeem units in the plan.

Portfolio Building – Thumb Rules

• Small allocations would not add any value to the overall portfolio. If a fund outperforms but has a meager allocation, the portfolio would not benefit from it. Make sure you allocate a significant part of the portfolio to a stock or a fund.
• Avoid speculating and stick to funds that have proved their mettle. Invest in well rated funds. Look at a 3-5 years performance history and ratings before investing.
• Quality is more important than quantity. Investing and managing so many funds can become a tedious task.
• Invest in fewer funds and do not get lured to the new fund offerings. Add a new fund to your portfolio only if it adds a unique diversification.
• Some significant component of debt is always helpful to a portfolio. Debt plays a major role in a bearish stock market and provides the cushion when markets tank.
• Ensure that the portfolio has a healthy debt component irrespective of the risk that you can handle. You can also invest in government debt instruments like bonds, fixed deposits or NSCs, but they are not tax efficient.
• Once you are done with the equity debt allocation, make sure you re-check the allocation and re-balance the portfolio (if required) at least once a year. This should also be done when stock markets crash or rise rapidly in a small interval.
• Being regular is the key. It is not possible to time the markets, nor should one try to do so. Be regular and systematic. Even if you prefer doing one time investment at times, you should also have SIPs to complement those.
• The SIP approach can also be adopted in stocks (of course it is not as simple as a mutual fund SIP).
• If you consistently buy a stock on a regular basis, it would help you average the cost over time. Make sure you do enough research before choosing a stock or consult an expert.
• Set a ceiling on exposure to a particular sector or stock/fund. High exposure would make the portfolio largely dependent on its performance.
• Do not track your mutual fund portfolio every day. Tracking funds' portfolio once in six months should suffice.
• Do not worry about short term fluctuations. Market sentiments can change overnight.
• If you are a long term investor you should not worry about the market gyrations