Monthly income plans have failed to perform in the past. Is the new scheme from JP Morgan worth considering?
JPMorgan Mutual Fund plans to launch an open-ended monthly income scheme—JPMorgan India Monthly Income Fund. Such schemes are commonly known as Monthly Income Plans (MIPs) as they offer a regular stream of income every month in the form of dividends. A typical MIP invests almost 85% of its assets under management (AUMs) in debt and keeps a small equity exposure for the upside. The scheme from JPMorgan Mutual Fund would invest 75%-100% of its assets in debt instruments and the remaining portion of the portfolio would be invested in equity.
In an analysis conducted a few months back, we found that MIPs have delivered a lacklustre performance (Read: Monthly Income Plans: Are MIPs worth considering?). In a period when the Reserve Bank of India (RBI) had cut interest rates and when the Sensex went up by nearly 15%, MIPs delivered a below par performance. In a period where MIPs got a chance to prove their mettle, even large fund houses struggled.
Over a year or so back, we compared the performance of MIPs with bank fixed deposits (FDs) (Read: Bank fixed deposits Vs MIPs: Neither monthly, nor income). Even after adjusting for taxes, FDs have proved to be better than the average MIP, over some periods. But the returns on an FD are assured. There are a few MIPs that have done well, but many have been terrible performers.
MIPs are riskier than pure debt funds because of their equity component. While they offer the opportunity to earn higher returns than those from pure debt funds, these may be lower, if the equity component performs poorly, as MIPs usually invest in blue-chip stocks only. There are only a handful of MIPs which have understood what serious asset management is all about.
How has the fund management company performed in the past? JP Morgan currently manages two schemes—JPMorgan India Equity Fund and JPMorgan India Smaller Companies Fund. Both the schemes have performed better than their benchmarks taking a three-year period. Even though the schemes have aged more than five years, they have been able to accumulate a total corpus of just over Rs300 crore. The fund management does not have a long track record of consistent performance.
Here again the fund house has chosen four managers to look over the scheme. The equity portion of the scheme would be managed by Harshad Patwardhan and Amit Gadgil who have 19 year and 11 years of experience, respectively. The debt segment of the scheme would be managed by Namdev Chougule and Ravi Ratanpal, who have 11 years and nine years of experience, respectively. Whether having four fund managers would ensure benchmark beating returns would be left to be seen.
Other details of the scheme
Minimum Initial Application: Rs5,000 per application and in multiples of Re1 thereafter.
Additional Application: Rs1,000 per application and in multiples of Re1 thereafter.
Maximum total expense ratio (TER) permissible under Regulation 52(6)(c)(i) and (6)(a) Up to 2.25%
Additional expenses under regulation 52(6A)(c) Up to 0.20%
Additional expenses for gross new inflows from specified cities# Up to 0.30%
Within and including 18 (eighteen) months from the date of allotment in respect of Purchases made other than through SIP—1%.
Following the surrender request from Parsvnath Infra, the Board of Approval, headed by Commerce Secretary SR Rao, has de-notified the zone at its meeting on 12th June
Faced with land acquisition problems, real estate major Parsvnath has surrendered its IT special economic zone (SEZ) in Haryana.
Following the surrender request from Parsvnath Infra, the Board of Approval, headed by Commerce Secretary SR Rao, has de-notified the zone at its meeting on 12th June.
“After deliberations, the Board decided to approve the proposal of Parsvnath Infra for de-notification of the sector-specific SEZ for IT/ITES at Sohna Road, Haryana.
“The approval is subject to the DC (Development Commissioner) furnishing a certificate that the developer has either not availed or has refunded all the tax/duty benefits availed under SEZ Act/Rules...” the minutes of the SEZ BoA meeting said.
The BoA is a 19-member inter-ministerial body that deals with SEZs and the issues related to them.
The board has also directed that the information regarding the case “must invariably be sent to CBDT and CBEC for taking necessary action”.
In its application, Parsvnath Infra had requested for de-notification of the zone on the grounds that “it has not been possible to acquire some small pockets within the notified area thereby affecting contiguity. And further extension of formal approval has been denied by the ministry of commerce”.
The IT/ITeS SEZ at Sohna Road, Gurgaon was notified on 23 August 2007 over an area of 42.4 hectares.
Earlier, a few other developers have also surrendered their SEZs due to the land acquisition problems.
Separately, the Board has also de-notified Biological E.Ltd’s SEZ for biotechnology proposed at Ranga Reddy District in Andhra Pradesh.
A bright future for the company but the stock may have run up too high for now