December net investments by mutual funds in equities at a 9-month low.
NEW DELHI - The hybrid schemes of mutual funds, which have seen assets rise multi-fold in the last one year, are struggling to deliver alpha returns in the last two months on the back of equity market indices falling by around 2% on month. The average net asset value of 52 equity-oriented hybrid funds fell at the end of August and September, an analysis of data from Value Research showed. These funds recorded positive on-month returns or a rise in net asset value in the rest of the calendar year. The average on-month return was (-)0.2% for these funds at the end of last month, following an average return of (-)0.3% at the end of August. The analysis covered returns of the direct plans-growth option of the hybrid funds. This follows declines of 2% and 1.2% on month in the equity market benchmark index of Nifty 100 Total Returns at the end of September and August, respectively. Many hybrid funds have been consistently having an exposure of 75-80% to equities which suited them till recently when markets were doing well and their performance was looking fantastic, according to Radhika Gupta, CEO of Edelweiss Asset Management. UNDERPERFORMANCE The equity-oriented hybrid funds have also been underperforming in the last two months, the analysis showed. At the end of last month, the average one-year return of the funds under review was 13.1%, which trailed a 13.5% one-year return a hybrid fund would have got had it invested 70% in Nifty 100 Total Returns index and 30% in 10-year gilt paper. As of the end of August, too, the average one-year return of equity-oriented hybrid funds had trailed the derived benchmark. The preceding two months, however, had seen these funds outperform (see table below). According to Aashish Sommaiyaa, CEO of Motilal Oswal Asset Management, hybrid funds were being promoted in the fund industry on the idea of conservatism but many of these funds were taking aggressive bets in equities with high-beta stocks in their portfolios. "High-beta equity holdings can do enough damage to destroy whatever a hybrid fund tries to cushion with debt," he said. GROWTH DYNAMICS Hybrid funds have seen net inflow of 389 bln rupees into them in Apr-Aug, according to last available data from the Association from Mutual Funds in India, 4.5 times more than in the same period a year ago. This rate of growth is higher than 3.5 times on-year rise in net inflow into equity funds to the tune of 581 bln rupees in Apr-Aug this financial year. Debt funds, on the other hand, have seen net inflow fall 21% on year for the same period. Hybrid funds have become popular in the last one year among fixed income investors who have been disappointed with declining interest rates from their savings in banks. As a part of their marketing drive on hybrid funds, many fund houses have been promoting monthly dividend payout of hybrid funds in a big way, according to Gupta. But this has come with an underlying promise of monthly income and a boost in returns from the equity exposure. But equity markets can fall without notice, say mutual fund analysts, and expose the equity component of hybrid funds to shocks. "If you look at a month like September when a hybrid fund may be down 1-2% on month, the dividend payout may have to come from capital and not reserves," said Gupta. DEBT-ORIENTED HYBRID FUNDS Other than equity-oriented hybrid funds, the mutual fund industry also offers debt-oriented hybrid funds where the equity portion is sought to be restricted to below 35%. Among these funds, the ones with 30-40% exposure to equities have also struggled to deliver alpha returns in the last couple of months. The average returns of 19 debt-oriented hybrid funds with aggressive equities component declined 0.1% on month as of the end of September, which was the first time it recorded a fall as of any month-end in the current calendar year, an analysis of the data under review showed. However, on their one-year returns, these funds managed to offer an average return which was higher than the benchmarks derived in the analysis. At the end of last month, the average one-year return of the 19 debt-oriented hybrid funds was 10.8%. It was higher than what such a fund would have got by investing 34% in Nifty 100 Total Returns index and 66% in 10-year gilt paper. Going forward, if equity markets remain subdued and the performance of hybrid funds suffers due to their equity exposure, the fund houses will find it extremely difficult to position hybrid funds as an alternative to bank deposits where a fixed rate of interest is assured and known upfront. The table below lists one-year average returns of direct plans of balanced funds and derived one-year returns of benchmarks. As of end of: ---------------------------------- Sep Aug Jul Jun ---- ---- ---- ---- Hybrid funds (equity oriented) 13.1 13.2 15.9 15.6 Derived hybrid benchmark* 13.5 13.3 15.8 15.2 Hybrid funds (debt oriented) 10.8 11.3 13.0 13.6 Derived hybrid benchmark** 10.1 10.1 11.4 11.2 * Assuming 70% of equity (Nifty 100 Total Returns) and 30% of debt (gilts) ** Assuming 34% of equity (Nifty 100 TR) and 66% of debt (gilts) End
Sebi's FY17 annual report reveals details of fees and charges collected from various intermediaries.
Here's something brief I wrote on it for the news organisation I work for currently:
Securities and Exchange Board of India rose a sharp 33% on year in 2016-17 (Apr-Mar). This was revealed in SEBI's annual report for financial year 2016-17, published on its website today. The data showed total fees and charges collected by SEBI rose 33% on year to 5.19 bln rupees in 2016-17, exceeding the on-year growth of 21% in the preceding financial year. The high growth in fees was led by an on-year rise in registration and turnover-based fee charged to equity derivatives brokers by 14% on year to 894 mln rupees. Fees charged to foreign portfolio investors jumped 41% on year to 852 mln rupees. These two categories of intermediary alone made up for a little over one-third of total fees and charges collected by SEBI in 2016-17 (Apr-Mar). SEBI's collection of charges pertaining to offer documents and prospectus jumped 64% on year to 479 mln rupees while the fees collected from equity cash market brokers rose 14% on year to 389 mln rupees. The only major area where SEBI's fee collection declined pertained to mutual funds. Total fees and charges collected from mutual funds in 2016-17 were 217 mln rupees, down nearly 10% on year. DIGITAL DRIVE The regulator's annual report also pointed out the measures it had been taking with regard to the ease of doing business through digital initiatives. SEBI said its new enterprise portal, which it had initiated last year to digitally transform its working, was being expanded in 2017-18 (Apr-Mar) to cover all intermediaries in the e-registration initiative it had started in 2016-17 (Apr-Mar). Further, SEBI said it was going to execute a case management system for end-to-end management and tracking of all cases it takes up right from inception till the closure of a case. The regulator will also integrate its complaint redressal system with its mobile app for better tracking and faster resolution of investor complaints, the annual report said. End