MF Weekly: SEBI eases investment norms for debt funds


Highlights:

 

SEBI eases investment norms for debt funds


SEBI has allowed debt fund managers to execute imperfect hedging through interest rates futures (IRFs). This will help fund managers reduce interest rates risk in debt portfolios. Under imperfect hedging; fund managers do not necessarily hold a debt security in the portfolio to buy interest rate futures of that particular security. For example, fund managers can buy interest rates futures of a 10 year G Sec even without having exposure to 10 year G Sec in the underlying portfolio. So far, fund managers could only hold interest rate futures of a security if they had the security in their underlying portfolio. Fund managers can now hold such imperfect hedged IRFs to up to 20% of net assets of the scheme.


AMFI requests SEBI to make MF Utilities a market infrastructure institution


AMFI has approached SEBI requesting to make MF Utilities a market infrastructure institution for the mutual fund industry, said three people familiar with the development. If SEBI recognises MF Utilities as the market infrastructure institution, all the transactions in mutual funds will go through a single gateway i.e. MF Utilities. The platform has to provide guaranteed clearing and settlement functions for transactions in mutual funds. This will lead to significant improvement in the transaction efficiency, transparency, liquidity and risk management practices in mutual funds along with added benefits like reduced settlement and operational risk and savings on settlement costs, says a CEO of a private fund house.


ICICI Prudential MF files draft offer document for Bharat 22 ETF


ICICI Prudential Mutual Funds has filed a draft offer document with SEBI to launch Bharat 22 ETF. Earlier in August, the government had appointed ICICI Prudential Mutual Fund to manage the new ETF to divest stake in 22 companies. While the earlier government ETFs had a sectoral focus, this ETF will have a well-diversified portfolio with exposure to six sectors such as basic materials, energy, finance, FMCG, industrials & utilities. Bharat 22 consists of 22 stocks of Central Public Sector Enterprises (CPSEs), Public Sector Banks (PSBs) and strategic holdings of Specified Undertaking of the Unit Trust of India (SUUTI). The Bharat 22 Index will be rebalanced annually. The Bharat 22 constitutes companies like National Aluminium, ONGC, Coal India, IOC, BPCL, SBI, Axis, Bank of Baroda, Rural Electrification Corporation, Power Finance Corporation, Indian Bank, ITC, Bharat Electronics, Engineers India NBCC, Power Grid, NTPC, Gail India, NHPC, NLC India and SJVN. The Government of India holds a majority stake in these companies. The fund house proposes to charge a fund management fee of up to 0.0095% of daily NAV. Kayzad Eghlim will manage the fund. While ICICI Prudential AMC will be the ETF manager, Asia Index Private Limited (JV BSE and S&P Global) will be the index provider. Globally ETF assets have grown significantly with an AUM of $4 trillion as on June 2017. ETFs are likely to touch AUM of $7 trillion by 2021, say some experts. Large Investors such as pension funds prefer investing in ETFs due to the benefits of low cost, transparency and liquidity.


SEBI requests SC to allow them to start afresh on SRO for MF distributors


SEBI has requested the Supreme Court to allow them to start afresh the appointment on self regulatory organization (SRO) of mutual fund distributors. The court has reportedly asked the market regulator to submit an application explaining to them why there is a need to introduce an SRO for the mutual fund distributors. In the latest hearing on September 20, the apex court said, “SEBI would like to proceed in the matter afresh in view of the period of time that has elapsed in the meantime (three years) and many other entities have become eligible in the meantime. The SEBI is permitted to bring the aforesaid developments on record and file an application with the aforesaid prayer(s), which would be considered once such an application is filed. Registry is directed to list the application immediately after such an application is filed.” As the name suggests, SRO or self regulatory organisation for mutual fund distributors will be responsible for micro-regulations of its members (MF distributors). The SRO will spread awareness about mutual funds among people, educate and train distributors and conduct screening test for them.


Multi cap funds constitute 30% of equity AUM


Multi cap funds have the highest AUM among equity funds, shows data collated from Value Research Online. We have excluded the AUM of the arbitrage funds category from the AUM of equity funds due to its short-term nature. Multi cap funds invest in stocks based on the market conditions irrespective of their market capitalisation. This gives multi cap funds a flexibility edge over other categories of equity funds such as large, mid and small cap funds as these funds have a more restricted pool of stocks based on market capitalisation. Value Research shows that multi cap funds have AUM of Rs.1.52 lakh crore as on August 2017. These funds account for 30% of the equity AUM.On the other hand, large cap funds have AUM of 1.36 lakh crore while mid cap funds manage assets of worth Rs.1.26 lakh crore.


MF industry adds 8,000 new distributors in eight months


The mutual fund industry added 7,846 new distributors in the calendar year 2017. As a result, the number of total individual ARN distributors was at 75,866 as on August 2017, shows AMFI data. The data shows that the total number of mutual fund distributors registered with AMFI including non-individual ARN holders increased by 9684 to 92,565 in 2017. If we include EUIN holders (employees of distribution firms), the total number of distributors goes up to 2.02 lakh, as on August 2017. It went up by 35,533 from 1.67 lakh in December 2016.

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