Equity mutual funds reported a net inflow of Rs10,945 crore during July 2014, the highest net inflow in six and a half years
Equity mutual fund schemes seemed to have turned highly attractive for savers over the past few months. On the third consecutive month of net equity fund inflows, investors put in a massive Rs10,945 crore in equity mutual fund schemes in July 2014; the month the budget was announced. This has been the highest inflow since January 2008, when investors brought in a record high of Rs13,678 crore in equity schemes. Though redemptions were higher compared to June 2014, at Rs6,689 crore, sales of equity schemes touched a record high of Rs17,634 crore. This was the highest sales for equity schemes recorded in nearly six and a half years. The previous highest sales was recorded in January 2008, at Rs21,247 crore.
Did the Budget announced on 10 July 2014, change investor sentiments? The budget sure seemed to have an impact on income schemes. Coincidentally, almost an equal amount of funds that flowed into equity was withdrawn from income schemes. Debt schemes or income schemes recorded a massive Rs10,080 crore net outflow in July 2014.
This has been the highest outflow from income schemes over the past year. The Budget announced a change in tax norms for capital gains on debt mutual fund units. For debt
scheme units redeemed in less than three years, returns will be considered as short-term gains and will be taxed as per the income-tax bracket. Before the budget, the period considered as short-term for capital gains purposes was 12 months or below. For long-term capital gains, the 10% without indexation benefit has been withdrawn and gains will now be taxed at 20% without indexation.
After the budget, investors sure seemed optimistic about equity schemes. This positive sentiment towards this risky asset class has been seen ever since the Narendra Modi-led government came into power with the promise of achche din, in May 2014. Foreign investors too, seem share this sentiment by pouring in nearly Rs40,000 crore in the past three months. This has led the benchmark market indices to hit all-time highs.
With the market hitting new all-time highs, it has become easier for fund houses and distributors to lure investors, quoting returns of equity schemes which are currently double or triple, that of bank fixed deposits or other fixed income assets. Investors usually fall prey to the glib talk of the market soaring to higher levels. We have seen in the past, when the maximum inflows have come at the market peak. The high equity mutual fund inflows seen in January 2008 is a prime example.
Adjusting for inflation, inflows seen in July 2014 were far from the peak inflows seen in January 2008. At an inflation rate of around 9% per annum (measured by CPI for industrial workers), adjusted for today’s prices, the inflows of Rs13,678 crore works out to as high as Rs25,110 crore. Inflows have not yet touched the half-way mark of the earlier peak inflows. At the same time, even the markets are of a lower valuation as compared to January 2008.
As many as 48,577 new equity scheme folios were created in July 2014. Compared to July 2013, the number of equity folios is lower by 2.42 million or 7.65%. There were two close-ended equity schemes launched, bringing in a total of Rs254 crore. In a month when the Nifty gained 1.44%, the assets under management (AUM) of equity schemes rose by 4.4% to Rs2.51 lakh crore as on 31 July 2014, from Rs2.41 lakh crore as on 30 June 2014.
Move America Forward has collected millions to send care packages to US troops. But its appeals often rely on images and stories borrowed without permission, and its assets have been used to benefit political consulting firms and PACs
This story was co-published with The Daily Beast
In February 2013, Move America Forward announced an ambitious fundraising goal. The charity, launched in part by one of the most prominent figures in the Tea Party movement, had adopted the 800 Marines in a battalion fighting in Afghanistan and wanted to send them all care packages.
"For some troops, these care packages are the only mail they will receive all year," the group said in one email solicitation.
The charity later described the fundraising drive as a rousing success: In less than five weeks, all 800 Marines in a 1st Marine Division battalion nicknamed Geronimo were sent care packages and notes in Afghanistan, it claimed.
But that couldn't have been true. The Marines of Geronimo weren't even in Afghanistan during Move America Forward's fund drive. Instead, they were deployed more than 3,000 miles away, in Okinawa, Japan.
Move America Forward calls itself the nation's "largest grassroots pro-troop organization," and has recruited a bevy of Republican luminaries, including former Presidents George H.W. Bush and George W. Bush and former Vice President Dick Cheney, to support its efforts.
Yet an examination of its fundraising appeals, tax records and other documents shows that Move America Forward has repeatedly misled donors and inflated its charitable accomplishments, while funneling millions of dollars in revenue to the men behind the group and their political consulting firms.
In several instances, the charity has taken images and stories from other groups and from veterans themselves without permission to use in fundraising appeals.
Last year, Move America Forward even solicited funds by claiming a partnership with Walter Reed National Military Medical Center, the largest hospital for wounded service members in the country. No such partnership existed, Defense Department officials say.
The charity's funds and other assets also appear to have been used to subsidize three conservative political action committees, records show.
Charity watchdogs have long criticized Move America Forward for spending too much on administrative fees and having little outside oversight. For instance, it earned zero stars out of a potential four from the rating organization Charity Navigator.
But experts on campaign finance and taxation say Move America Forward's practices may trigger more than bad ratings. Its activities could violate tax rules, which prohibit charities from engaging in partisan politics or overly benefiting the people who run them.
"They're playing audit roulette," said Marcus Owens, a lawyer who once ran the division on tax-exempt organizations in the Internal Revenue Service. Owens said Move America Forward reminded him of the Coalition for Freedom, a charity linked to then-Senator Jesse Helms that lost its tax-exempt status with the IRS largely because of its political activities in the mid-1980s.
"They're betting the IRS won't find them, or won't find them in time."
The driving force behind Move America Forward is Sal Russo, 67, the longtime political consultant who is listed on the 10-year-old charity's tax returns as chief strategist.
Russo is better known for helping to form the Our Country Deserves Better PAC, also known as the Tea Party Express, one of the largest Tea Party groups in the country.
Consultants from his Sacramento-based firm, Russo, Marsh and Associates, also set up two other PACs, the Move America Forward Freedom PAC and the Conservative Campaign Committee, to aid conservative causes and candidates.
Russo and his associates have previously drawn attention for lavishing funds raised through the committees on themselves, using this money on an Alaskan cruise and fancy hotels as well as paying themselves huge consulting fees.
Russo didn't respond to questions from ProPublica. Danny Gonzalez, a spokesman for Move America Forward, did not answer questions either, instead providing a four-paragraph defense of the charity. "We are proud of the fact that we always appropriate our donor's (sic) funds ethically and in the spirit of our mission to support the troops," he said, adding that Move America Forward was currently preparing 2,000 boxes of care packages for shipping.
It's not clear who currently oversees Move America Forward's day-to-day operations. The former executive director, Shawn Callahan, left in 2012 and does not seem to have been replaced. Callahan also didn't respond to questions, although last year, he defended the group to ProPublica in an email and said Move America Forward had been audited recently by the IRS. (The IRS does not comment on individual taxpayers.)
"I personally oversaw the audit where I worked with the IRS as they went over every penny spent with a fine-tooth comb," Callahan wrote in March 2013. "As expected, they reported that we were in full compliance and all our expenditures were appropriate."
Bill Durdin, the family readiness program coordinator for the 1st Marine Division, said Move America Forward recently sent care packages to at least five units in the division, but said a "thank you" letter from him the charity included in a March 2013 email praising donors for the Geronimo pledge drive had actually been written a year or two earlier. In an email to ProPublica, Durdin described the charity's use of his letter as "a serious case of 'Cut & Paste(ing)'!"
Move America Forward raises much of its money with its annual fundraiser, called Troopathon, held this year in the Ronald Reagan Presidential Library and broadcast live on the Internet.
Over the years, Troopathons have featured live and taped appearances by conservative stars from entertainment, media and politics, including actor Gary Sinise, rock idol Gene Simmons of KISS, Sarah Palin, Rick Perry, Rush Limbaugh and Sean Hannity. The charity counts all the money raised in the month of the broadcast as part of Troopathon.
"I'm hoping this will be the biggest and best event that we've had to let our troops know that we will not forget you," spokeswoman Debbie Lee said during an appearance over Memorial Day weekend on the Breitbart News Sunday radio show that kicked off this year's fundraiser. "We do recognize, even though, you know, there's been changes over there, that you're still there fighting.
"And we're here for you. We've got your back."
Move America Forward says on its tax returns that its mission is to "provide and promote support (for) our brave men and women in the armed forces."
It raised $7.8 million from 2008 to 2012, about 44 percent of it from the month of Troopathon.
Much of the rest came from responses to the emailed appeals it sends out every day or two, emotional notes packed with exclamation points and capital letters. The emails often seize on a tragedy like the Boston bombing and then ask for help sending boxes filled with items like Jelly Belly jelly beans, Swiss Miss hot chocolate and Hoo-Ahhs field towels.
Tracking the truth of this assertion is difficult, however. Neither the Defense Department nor the International Security Assistance Force in Afghanistan monitors who sends care packages to military personnel.
Each package for an individual service member is paid for with a $24.99 donation, the charity says, but it's unclear what the $24.99 pays for. The items in each care package are donated, a former consultant who spoke on condition of anonymity said, and volunteers put them together. "Our volunteers pack each box to the brim," the charity's outreach coordinator Scott Raab told a radio show over Memorial Day weekend.
The Sensex and the Nifty rose 1% each during the fortnight ended 31st July. ML Mid-cap Index rose 1%. ML Mega-cap Index and ML Large-cap Index ended flat. ML Small-cap Index and ML Micro-cap Index declined 3% and 5%, respectively.