Over 75% of PMS funds deliver excess returns than mutual funds: Report

While PMS is meant for high-net-worth individuals (HNIs) and mutual funds are accessible to all investors, an analysis of their return profiles shows that over 75% of PMS approaches have given excess returns than mutual funds over 10 years.

PMS Bazaar analyzed 335 PMS investment approaches and 388 regular mutual funds across 1, 3, 5, and 10-year periods and found that PMS investment approaches outperformed their benchmarks by an impressive 70% on average across all timeframes and categories, while MFs managed a respectable 48%.

“Interestingly, when comparing PMS to mutual funds, PMS investment approaches consistently outperformed mutual funds across all timeframes. For example, in the 5 years, 59% of PMS investment approaches outperformed their benchmarks compared to just 46% of mutual funds. This trend continued in the 3-year and 10-year periods, with PMS consistently delivering superior benchmark-beating returns,” the study said.

During the 3-year window, barring the thematic category, PMS outperformed benchmark and mutual funds across all the categories. The PMS smallcap approaches thrived, exceeding the benchmark by a whopping 91% compared to mutual funds’ 41%. Midcap PMS also shone, surpassing the benchmark by 84% compared to just 17% of mutual funds. Similar dominance was seen in the large, large-mid, multi, and flexi cap categories in the 3-year timeframe, it said.

PMS schemes are meant for HNIs to park surplus capital as it comes with a minimum ticket size of Rs 50 lakh, while mutual fund investing begins as low as Rs 100.

PMS vs direct mutual funds

In the one-year period, PMS led with 86% outperformance compared to 60% for direct funds. But in the three-year period, both PMS and direct funds outperformed benchmarks by 58%. On the other hand, during the five-year period, direct mutual funds took the lead with 62% outperformance, while PMS lagged at 59%. And in the long-term 10 years, PMS emerged as the winner, boasting 79% outperformance against 65% for direct funds and the benchmark.

Top PMS funds

In the last year, Invasset Growth Pro Max Fund is the top gainer with a 96.6% return, followed by Aequitas’ India Opportunities Product and Shephard’s Value Magno. On a 3-year timeframe, top gainers are Counter Cyclical’s Diversified Long Term Fund, Green Lantern’s Growth Fund, and Aequitas’ India Opportunities Product, shows PMS Bazaar data.

In the last 5 years, Green Lantern’s Growth Fund, Bonanza’s Edge, and Sameeksha’s India Equity Fund have performed well while the 10-year map shows Aequitas’ India Opportunities Product, Nine Rivers’ Aurun Small Cap Fund and Globe Capital’s Value Fund as top winners.

Source- Economictimes

Jio Financial-BlackRock JV applies for mutual fund licence

The joint venture between Jio Financial Services and BlackRock has applied for a mutual fund licence with the market regulator, and the application is currently under consideration, according to a SEBI update. An update on mutual fund approval status from the Securities and Exchange Board of India (Sebi) as of December 31, 2023, lists Jio Financial Services & BlackRock Financial Management among the applicants under consideration for a mutual fund licence.

Jio submitted its application on October 19, and Sebi’s status report showed that it is “under process”.

Jio Financial Services Ltd, the newly demerged financial services arm of billionaire Mukesh Ambani’s Reliance, and BlackRock announced an agreement in July 2023 to form a 50:50 joint venture with a USD 150 million investment each to enter the asset management business in India.

“Jio BlackRock combines Jio Financial Services’ knowledge and resources with BlackRock’s scale and investment expertise to deliver affordable, innovative investment solutions to millions of investors in India,” an earlier statement said.

The potential MF may utilize a digital-first approach to democratize the Rs 50 lakh crore MF industry.

Source- Economictimes

December 31 is not the last date to add mutual fund, demat nominations

The deadline for adding nominations to mutual funds and demat accounts, earlier set for December 31, 2023, has now been extended to June 30, 2024.

Although the last date has been postponed, investors who have not filled out the ‘choice of nomination’ for their mutual funds and demat accounts should do so at the earliest. As per the market regulator, failure to submit the nomination form will lead to frozen fund folios and accounts.

How to fill up/update nomination details

Investors have three options:

One, investors can visit the websites of registrars and transfer agents (RTAs), such as CAMS and KFintech.

Two, they can choose to visit the concerned fund houses’ websites.

The third option is for investors to use the MF Central platform to update nominations in one go.

Process to update mutual fund nominations on MF Central

• Go to www.mfcentral.com. Make an account if you don’t have one. To set up an account, you’ll need to provide your PAN and mobile number.
• Once your account is set up, log in to MF Central using your PAN and password/OTP.

• Click on ‘Submit Service Request’ on the page.

• Then, click on ‘Update Nominee Details’.

• You can view all the mutual fund holdings here. Click on the folio where nominee details are labelled as ‘No’.

• If you want to edit an existing nominee, click the edit symbol. If you want to add a new nominee, click ‘Add Nominee’. If investors do not want to add anyone, select ‘I do not wish to nominate’.

• You will need to add the name, date of birth, relation and gender of the nominee. Once done, press ‘Save’.

• The nomination details will be verified by an OTP. Repeat this process for other folios, too.

For the uninitiated, the earlier deadline to fill up the nomination details was set for September 30, 2023. But the deadline was shifted to the end of the year.

Source- Valueresearchonline

Why Indian mutual fund industry wants you to order less on Swiggy, Zomato

Despite the growing retail interest in financial products, the Indian mutual fund industry has just 4 crore investors. In the podcast ‘The BarberShop with Shantanu’ podcast, hosted by Bombay Shaving Company founder Shantanu Deshpande, Radhika Gupta, MD & CEO of Edelweiss Mutual Funds, says that that MF industry has to compete with the likes of Swiggy and Zomato for investors’ money and she urged the youngsters to save more. Edelweiss Mutual Funds has assets under management of over Rs 1.2 lakh crore. She is also a judge in the new season of popular show Shark Tank India.

“I am the one who is competing with Zomato and Swiggy! I am telling you, if you have Rs 50,000-60,000 per month, please save some! People tell me that they can’t put even Rs 100 in SIPs because they don’t have money…I mean you pay Rs 100 per month to Netflix!” she said.

“You know there are 40 crore people in this country who subscribe to one OTT streaming platform or do Zomato, Swiggy. That means they pay at least Rs 100 a month? But there are only 4 crore people in the country who invest in mutual funds!”

But she is hopeful that the today’s youngsters will save more going forward.

“We are very critical of this generation. Our parents grew up in an India of scarcity, our generation grew up in an India of transition, the generation you are talking about has grown up in an India of pure abundance. So that sense to own isn’t there and there is perhaps less appreciation. But who is to say that when these 20-year-olds turn into 30-year-olds they won’t turn into a saver?” she said.

On entrepreneurship, Radhika Gupta said, “it is about creating value. whether you are creating in an existing busienss or starting a new business.”

Data released this week showed that overall inflows into India’s equity mutual funds fell in November even though contributions into systematic investment plans (SIPs) – in which investors make regular payments into mutual funds – hit a record high,. The inflows into equity mutual funds dropped 22.15% month-on-month to Rs 15,536 crore in November from Rs 19,957 crore in October, data from Association of Mutual Funds in India showed. Some analysts attributed the dip in inflows to Diwali-related shopping that competed for investors’ money. The benchmark Nifty 50 gained 5.52% in November.

Recently, Sebi’s chairperson Madhabi Puri Buch said that the on Friday said the markets regulator is aiming to sachetise mutual fund investments which will help in financial inclusion.

“We are working with them (MF industry) to see where is the cost, what can Sebi do to facilitate making it possible to bring that viability down to Rs 250 a month, because then it is the equivalent of what Hindustan Lever did with shampoo sachets. You just explode the market,” she said.

Source- Economictimes

Mutual funds in demats be damned

When investing in mutual funds, you have two options: receiving your units in a Statement of Account (SoA) or your demat account, both of which are digital, eliminating the need for paper certificates.

The SoA option offers a more traditional way to hold mutual fund units. In this case, you deal with the asset management company (AMC) directly. The AMC issues a statement indicating your fund holdings when units are allotted.

On the other hand, in demat form, a Depository Participant (DP) like Central Depository Services and National Securities Depository holds the mutual fund units. Demat units can be bought and sold through brokers, or your DP.

Which mode is better: Demat or SoA?

Earlier, demat accounts allowed you to view all your investments in one place. However, having a consolidated view of your investments is now also possible through the CAS (Consolidated Account Statement), and one need not necessarily have a demat for the same.

The table below highlights the differences between mutual funds held in a demat account vs SoA:

As it can be seen, for most investors, SoA is the preferred choice, offering a simpler and more straightforward way to hold mutual funds.

What you should do

Switch to the SoA option. They help you save money, are faster and more flexible.

• If you have a distributor handling your money, call them and ask if you hold funds in a demat account . If that’s the case, get it converted to a Statement of Account (SoA).
• If they try to sell you demat accounts, change your distributor. (They might be earning a brokerage).
• Only if you buy ETFs (exchange-traded funds) should you have a demat account. For all the other funds, SoA works best.

How demat account is converted

Step 1: Submit a signed Rematerialisation Request Form (RRF) to your DP (the entity that manages your demat account). You’ll get this form from the DP itself.

Step 2: The DP will verify the form and send it to the RTA, a body that maintains mutual fund records.

Step 3: The RTA will transfer your investments to SoA.

That’s pretty much it. You just need to file the RRF by having your Aadhaar and PAN next to you.

By changing to the rather-convenient Statement of Account (SoA), you’ll earn higher returns and stop paying unnecessary fees for a start.

Source- Valueresearchonline

Mutual funds that still enjoy indexation benefit

Ever since debt funds, international funds and gold funds lost indexation benefits – an inflation-adjusting feature that lowers tax liability – investors, especially conservative ones, have been in the dark about what to do now.

Krishnan V, one of our subscribers, is among them. He contacted us, asking if there’s a mutual fund with a 40-60 equity-debt split that also offers indexation benefits.

We hope the below table answers the question.

As you can see, balanced hybrid, multi-asset and dynamic asset allocation funds still retain indexation benefits. Let’s look at them at a glance.

Balanced hybrid funds

The equity allocation in these funds usually fluctuates between 40 and 60 per cent, activating indexation perks.

That said, there are no balanced hybrid funds currently in the market. Instead, what you have are a few solution-oriented funds. A few examples of these funds are UTI’s children’s career savings funds and retirement benefit pension funds.

Multi-asset funds

These funds invest in at least three asset classes, with a minimum allocation of 10 per cent in each.

The asset classes include equities, debt, real estate, international securities and commodities like gold and silver.

However, the equity allocation in these funds can vary widely, and the indexation benefit depends on this equity allocation. The fund receives indexation benefits only if the equity allocation lies within the 35 per cent to 65 per cent range.

So, keep a close eye on the fund’s asset allocation to ensure it qualifies for the indexation benefit.

Moreover, these fund’s decision to invest in commodities and real estate do not sit well with us. We have, for long, believed that they are not great investments in the long run.

Dynamic asset allocation (AKA balanced advantage funds)

Technically speaking, these funds can choose to have a 35 to 65 per cent allocation in equities and the remaining in debt. That said, quite a few of them have a higher equity allocation, thereby limiting the choice of conservative investors and retirees.

What got us thinking now is whether it makes sense to do a 40-60 equity-debt allocation yourself.

There are two reasons why:

• There are very few mutual funds in the 40-60 equity-debt space.
• We also wanted to see if the do-it-yourself (DIY) method is tax efficient.

So, we pitted UTI Children’s Career Fund – Savings Plan with a DIY allocation, and here’s what we found:

Although the DIY asset allocation option has a marginally higher tax liability, its post-tax returns are considerably higher, as shown in the above table.

There are two reasons why:

• The DIY investment (40 per cent in a flexi-cap fund and the remaining 60 per cent in a short-duration debt fund) generated 9.2 per cent as against the UTI fund’s 8.35 per cent
• The DIY tax liability was not too high compared to the UTI fund because flexi-cap fund gains up to Rs 1 lakh are exempt from tax.

The last word

Clearly, the DIY route makes more sense for retirees or conservative investors looking at a 40 per cent exposure to equities.

However, don’t dive into it headlong. Opt for the DIY option only if you have the knowledge and time to monitor and adjust your portfolio.

Source- Valueresearchonline

Mutual Fund Investment in India As An NRI

It is now common for many people to relocate abroad for work or study. In a few months, they settle down there and become NRIs (Non-Resident Indians). If you, too, are one of those people, a question might arise in your mind. What happens to your stocks and mutual funds investments if you leave the country?

Mutual Fund Investment For NRI

You can continue to invest in domestic mutual funds once your residency status switches to NRI (Non-Resident Indian). However, according to the Foreign Exchange Management Act (FEMA) of the Reserve Bank of India, you must modify your residential status in your bank accounts and other assets, like mutual fund schemes. While NRI mutual funds investment is not restricted in India, you must update your residential status and bank account information.

Things You Need To Keep In Mind After Becoming NRI

Even though there is not much difference between investing as a resident or as an NRI, there are some things that you need to keep in mind as an NRI while investing in mutual funds in India, such as:

Open an NRI bank account- You cannot maintain your regular account if your residential status switches to NRI, according to FEMA (Foreign Exchange Management Act) standards. Furthermore, Asset Management Companies (AMCs) in India cannot take foreign currency investments. As a result, you must open an NRE bank account or convert your ordinary account to an NRO account.

NRE and NRO account- You can save your foreign profits in an RBI-registered bank in India by opening an NRE (Non-Resident External) bank account. You can also open an NRO (Non-Resident Ordinary Account) account to deposit your Indian earnings, such as a pension, dividends, rental income, etc.

Update your Residential Area- After becoming a Non-resident of India, you must update your current residential address in your KYC (Know Your customer). You also need to inform the mutual fund house where you have invested. You can do it by submitting some documents like your PAN card, passport or address proof.

Taxation Policy For NRI’s

The mutual fund taxation rules for NRIs and residents of India are similar.

If the investment is made for a short period of time, such as one year or less, the tax rate will be 15% under the short-term capital gains taxation rules.

But if the investment is for more than one year or for the long term, then the tax charges will be 10% according to the long-term capital gains tax rules. If the gains reach Rs. 1 lakh, short-term capital gains are taxed at 15% and long-term capital gains at 10%.

However, If the NRI’s country of residence has not signed the DTAA (Double Tax Avoidance Agreement), the NRI has to pay taxes in both countries, the country of residence and India.

To Sum Up

In conclusion, as an NRI, investing in mutual funds in India is not significantly different from investing as a resident. However, understanding the taxation policy for NRIs is important, including the difference in tax rates for short-term and long-term investments and the impact of DTAA agreements. By considering these factors and investing wisely, NRIs can make safe and profitable mutual fund investments in India.

Source – Shoonya