Mutual Funds
ICICI Prudential Lakshya fund—A bit too risky for planning your goals

Another goal-oriented fund of funds scheme. The scheme suggests too much risk for short term goals

More and more companies are coming out with what is called “life cycle funds”. Recently, Axis Mutual Fund filed its offer document with the Securities and Exchange Board of India (SEBI) to launch a scheme—Axis Life Plan with a variable asset allocation plan. Now, ICICI Prudential Mutual Fund has followed suit and has filed its offer document to launch a scheme on similar lines—ICICI Prudential Lakshya Fund. This open-ended goal oriented fund, which is basically a fund-of-funds scheme, will follow an asset allocation pattern linked to number of years up to the end of a specified plan cycle. There would be six different plan cycles ranging from three years to 18 years. The asset allocation structure will change such that the scheme reduces its risk as it approaches the completion of the cycle. It would invest in equity and debt schemes of ICICI Prudential Mutual Fund or schemes of other mutual funds.

The scheme is structured such that an investor who has an investment goal of three years would invest in the three-year plan; those with a six-year investment horizon would invest in the six-year plan. ICICI further plans to provide its investors with a tool known as “Lakshya Calculator”. The purpose of the tool is to assist investors in determining the amount of funds required to be invested to reach the target amount, based on certain assumptions, such as anticipated inflation rate and expected rate of returns, which would be entered by the investor. Once the amount to invest is calculated, the tool would suggest one of the ‘Lakshya’ plans based on the number of years to the achievement of the goal.

The fund would be managed by Mrinal Singh who has nine years of experience and who manages 10 other schemes of ICICI Prudential. The schemes of ICICI Prudential MF have done reasonably well in the past compared to the benchmark.

On reviewing the Axis Life plan, Moneylife pointed out that their approach was too conservative for the long-term. For the plan with 15 years to completion starts with investing just 50%-55% in equities. The asset allocation of the ICICI plan is just the opposite and is far more aggressive. For the period up to five years preceding the end of the cycle of the plan the scheme would invest 90%-100% of its assets in equity funds. The allocation towards mid-caps and large caps funds changes over the number of years to the end of the plan cycle. For example, a plan with over six years to go would have a significant portion of its equity investment invested in mid-cap funds, with the rest in large-cap funds and this allocation to mid-caps would reduce subsequently in the years to come. This is in line with the strategy of the fund of taking more risk over a longer period. The asset allocation towards equity and debt changes in the last five years only. The plan would follow the asset allocation below:

This aggressive strategy of the fund can be disastrous for the investor given that market movements are never smooth. Moneylife research shows that with three years to the completion of an investment goal, to have around 60% to 80% in equities is extremely risky. Imagine the situation of someone who is supposed to need the money in late 2010. A lot of his wealth would be decimated in 2008. Markets can remain depressed for years together. In fact, this is the problem with all fixed formula-driven approach, as pointed in More than You Know by Michael Mauboussin. They are not flexible enough to take into account random and highly volatile market movements. A fixed formula approach in a stock market would produce random results. In other words, your Lakshya may or may not be met. (Read: Axis Life Plan: Fund of all Funds)

Apart from the changing asset allocation of equities over the years, a major change in asset allocation happens only in the last five years. An investor can easily manage this kind of allocation and does not need to pay a fund manager to do it. Secondly, as the majority of the investment of this scheme would be in ICICI funds itself, an investor would be better off if he is able to choose from the best performing funds available in the market. Thirdly, as this is a fund-of-funds scheme the investor would receive no tax benefit for investing for the long-term and would have to pay tax on capital gains. Long-term capital gain tax would be 10% (20% with indexation) and short-term capital gains would be taxed according to the income slab of the investor to the scheme.  


Italian authorities move Kerala HC to quash FIR

The petitioners submitted that the Kerala Police have no authority to conduct investigation in the case and courts in India have no jurisdiction as the incident occurred beyond its territorial waters

Kochi: Questioning the jurisdiction of Indian courts and police, the Italian government and two naval guards of an oil tanker today moved the Kerala High Court seeking quashing of the first information report (FIR) charging the marines with murder of two fishermen while firing from the ship off the state coast, reports PTI.

As the diplomatic row between the countries continued since the 15th February incident, Italian Consul General in Mumbai Gian Paolo Cutillo and the two accused—Latore Massimiliano and Salvatore Girone—filed the petition seeking to quash the FIR registered by Kollam police in Kerala.

The petitioners submitted that the Kerala Police have no authority to conduct investigation in the case and courts in India have no jurisdiction as the incident occurred beyond its territorial waters.

The marines, suspected to have shot dead the fishermen, took the legal recourse two days after they were arrested by the state police capping four days of hectic negotiations between Indian and Italian officials on the issue of submitting them to Indian authorities.

Italy has been maintaining that the incident occurred outside Indian territorial waters and the marines’ action was taken assuming the fishing vessel to be carrying pirates.

In a related development, the court admitted a petition by the family of one of the deceased fishermen seeking Rs1 crore compensation and directed the owners of Italian vessel Enrica Lexie to furnish a bank guarantee of Rs25 lakh.

Justice Harun-UL-Rasheed admitted the petition by Doramma Valentine, wife of Valentine alias Jelstine (45), and issued notices to the ship owners, accused, and Cochin Port authorities.

The high court directed the port authorities to ensure that the ship is arrested in the port till the bank guarantee was furnished.

Ms Valentine’s counsel insisted on a bank guarantee for Rs1 crore but the court turned it down and limited it to Rs25 lakh. He complained that the in the eyes of the ship owners, Indian citizen will not have much value.

The petitioner, who sought the compensation from the ship’s owners, captain and the two marines, had submitted she did not have Rs8,18,400 to pay as court fees required under section 22 of the Kerala Court Fee and Suit Valuation Act and should be declared as pauper.

The shipping company objected to the petitioner’s plea to waive the stamp duty after declaring them as pauper.

Ms Valentine also filed an application seeking exemption from appearing in the court to present the petition.

The petitioner’s counsel informed the court that the last rites of her husband were underway and the family was in a state of shock and was not in a position to appear today.

The ship owners’ counsel contended that they had to pay Rs30 lakh per day for three days as demurrage charges to the port.

The vessel is berthed in the outer port area with the Coast Guard and police keeping a close watch.


HDFC Bank’s Mobile Payment Service

The new mobile service finally allows millions of Indians currently excluded from enjoying the benefits of mobile and online payment services to become part of the digital age via their basic prepaid mobile phone.

Movida, a mobile payments joint venture backed by Visa and Monitise, has signed an agreement with HDFC Bank to introduce a revolutionary new mobile payment service. The innovative new service allows HDFC Bank customers to pay bills, top up prepaid airtime and buy tickets from their mobile phone and is designed to operate across all mobile networks using any Visa and non-Visa branded payment account. It can be used by anyone, anywhere and accessed by even the most basic mobile phone.
Naushad Contractor, Movida’s President and head of the Monitise and Visa joint venture in India, commented: “This is a service designed by Indians, for Indians. As we rollout the service to other banks more Indians will be able to benefit from mobile payments. Wave goodbye to waiting in long queues or visiting post offices or payment machines to pay bills as you will now be able to do that right from your mobile phone. This service is going to eliminate the time and energy Indians waste every day waiting to pay bills.”

The new service uses straightforward, menu-based USSD mobile technology making it one of the easiest services to use and the most widely available. After linking their HDFC Bank Visa or non-Visa payment card to their mobile phone number, cardholders can access the service via USSD using Movida’s secure connection.  From then on it is just a matter of selecting a required service and making the payment. The simple menu can complete a transaction in a mere four to five steps.
And not only is the service simple, it’s secure and backed by two of the world’s most trusted brands. The system encompasses various security measures to maintain account integrity, including a unique PIN number set up on the phone to access the account information. Only the user’s bank-registered phone can be connected to the service.

Mr Contractor added: “This technology will be a game changer the way the iPhone was for mobile phones.  This is a smart service for smart people and epitomizes everything Visa and Monitise stand for: it is fast, reliable, secure, and simple - and it will change the way consumers in India pay, forever.”

Rahul Bhagat, head-retail liabilities, marketing and direct banking channels, HDFC Bank, said: “HDFC Bank has always been at the forefront of technology to ensure that our customers have greater choice and convenience at their disposal. The partnership with Movida is a crucial step whereby we will enable our customers to carry out multiple mobile commerce transactions from the most basic handsets.”

The new mobile service finally allows millions of Indians currently excluded from enjoying the benefits of mobile and online payment services to become part of the digital age via their basic prepaid mobile phone.

The service is initially being offered to a select number of valued customers before being rolled out across the country later in the year.



prashant n

5 years ago

Can I get more clarification on this point

"Only the user’s bank-registered phone can be connected to the service"

does this mean, if the SIM is changed from one mobile phone to another mobile phone, the bank's mobile payment service will be disabled



In Reply to prashant n 5 years ago

The problem is there are simply too many different handsets today. For example, if you are using a Nokia with Symbian, and want to change it to any Android phone, then the Bank may not be able to send/receive 'appropriate communication' necessary to authenticate the transactions from the handset (like IMEI verification). It is advised that if you are changing your phone then re-register with the bank again.

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