Hybrid schemes in the past have delivered an inconsistent performance and offer no advantage for investors. Being closed-ended makes it worse
SBI Mutual Fund plans to launch a series of close ended hybrid schemes with tenures ranging from one year to five years. The exact duration of each series under the scheme shall be decided at the time of launch of the respective series. The scheme—SBI Dual Advantage Fund Series–(XX)—would invest over 65% in debt and money market instruments and the remaining part of the portfolio would be invested in units of equity oriented mutual funds and gold exchange traded schemes. Despite the high risk associated with the metal, many fund houses include gold as an asset class in such hybrid schemes.
In this scheme, the allocation to gold can go up to a maximum of 35% of the portfolio. The performance of the scheme would be dependent on the market-timing skills of the fund manager to actively move in and out of equities, bonds and gold. Predicting the movement of gold and interest rates are challenging tasks, even for the best of professionals. This will mean that the fund will most likely do a poor job of moving in and out of gold and debt products. That apart, how will an investor decide how much to put into such schemes when he already has money invested in equities, bank fixed deposits and gold separately?
In an article published a few months back (Read: Hybrid Gold Schemes: No Golden Touch), we analysed the performance of hybrid schemes investing in gold. Performance of these schemes has not been great over the past one year. Inflation has gone up by over 9% over the past year, but gold, which has always been considered a hedge against inflation, has declined in value. The recent sharp correction in the price of gold has not only come as a shock to many investors, it has also questioned many beliefs surrounding the asset. Out of the 24-odd schemes, as many as six schemes had an allocation of more than 25% to gold. All the six schemes have delivered a negative return over the past six-month period and were the worst performers among all the schemes. Just seven schemes have a track record of more than three years. But although gold has risen sharply compared to equity indices in this period, the returns of these schemes have ranged between 6% and 7%.
Similar schemes from SBI Mutual Fund have put up a mixed performance over the past one-year, three-year and five-year periods. Such inconsistent performance is one of the reasons hybrid schemes serve no additional value to investors. Below is the performance of the schemes:
Rajeev Radhakrishnan is the designated fund manager for the debt part of the portfolio. He has a total experience of 10 years in funds management with around 8 years in Fixed Income funds management and dealing. Richard D’souza, will be managing the equity portion of the portfolio. He has over 19 years of work experience in equities as a portfolio manager.
Other details of the scheme
Benchmark: Crisil MIP Blended Fund Index
Minimum Amount for Application in the NFO: Rs. 5,000/- and in multiples of Re. 1/- thereafter
Maximum total expense ratio (TER) permissible under Regulation 52(6)(c)(i) and (6)(a): Upto 2.25%
Additional expenses under regulation 52(6A)(c): Upto 0.20%
Additional expenses for gross new inflows from specified cities: Upto 0.30%
Exit load: NA as close-ended scheme
Arun Firodia, founder and chairman of the Kinetic Group of companies is declared as wilful defaulter by several banks and yet Vijay Kelkar recommended his name for Padma Shri, the fourth highest civilian award in India
Following directions from the Central Information Commission (CIC), the ministry of home affairs (MHA) has revealed that Vijay Kelkar, a key-functionary attached with the union finance ministry and himself an awardee of Padma Vibhushan, had recommended name of Arun Firodia, founder and chairman of the Kinetic Group of companies for Padma Shri. Earlier in January 2012, Mr Firodia was awarded Padma Shri from the trade and industry category.
According to a reply received by Subhash Chandra Agrawal under the Right to Information (RTI) Act what is more shocking various intelligence authorities including those attached with ministry of economic affairs also cleared Mr Firodia's name without any proper check. Several news-reports and website of Credit Information Bureau (India) Ltd (CIBIL) have mentioned Mr Firodia and his daughter, Sulajja Firodia Motwani as being wilful bank-defaulters.
See the reply Mr Agarwal received under the RTI Act…
Padma Shri (also Padmashree) is the fourth highest civilian award in India and is awarded in recognition of their distinguished contribution in various spheres of activity including the arts, education, industry, literature, science, sports, medicine, social service and public affairs. The selection criteria for the Padma awards, however, has been heavily criticised as many highly deserving people have been left out in order to favour certain individuals.
As Moneylife reported, despite all checks and balances, neither the committee nor agencies and regulators like Intelligence Bureau (IB), Central Bureau of Investigation (CBI), Central Board of Direct Taxes (CBDT), Directorate of Revenue Intelligence (DRI), Central Excise Intelligence (CEI), Research and Analysis Wing (RAW) and Securities and Exchange Board of India (SEBI) could find out Mr Firodia’s bank defaults.
Several banks have declared Mr Firodia a “wilful defaulter” continuously between 31 March 2005 and 31 March 2012 and yet his name was cleared. In a report available on the website of CIBIL, as of 31 March 2012, Mr Firodia's name has been shown associated with Kinetic Finance, Athena Financial Services, along with his daughter Sulajja Firodia Motwani. According to CIBIL data, as of 31st Match, Athena Financial Services has an outstanding of Rs54.60 crore, while Kinetic Finance owes Rs2.76 crore to debtors, mostly banks.
Demanding an enquiry in the clearance given by intelligence agencies and authorities to Mr Firodia for the Padma Shri award, Mr Agarwal said, "Exemplary stringent-most action should be taken against the irresponsible officers in these agencies having cleared Arun Firodia’s name for Padma Shri to prevent such carelessness by Intelligence Authorities in clearing names of Padma awardees in future. To save dignity of Padma awards, it should be immediately taken back from Arun Firodia. Surprisingly, the father-daughter duo have been turn-by-turn members of the governing-body of Council of Scientific & Industrial Research (CSIR), a union government-enterprise. Wilful bank-defaulters must not be allowed to hold posts in government-bodies."
Attorney general Vahanvati told the apex court that no specific proposal could be worked out for enabling new construction in the compound
The Supreme Court on Tuesday ruled that residents of unauthorised flats in seven buildings at Campa Cola compound in Mumbai have to vacate premises by 31 May 2014.
The apex court has also asked occupants of illegally constructed flats to give an undertaking within six weeks to vacate their houses.
Attorney General GE Vahanvati told the Supreme Court that no specific proposal could be worked out for enabling new construction in the compound.
If no undertaking is given within the specified period, civic body will be entitled to take action in accordance with the 27th February 27r, the SC said.
Earlier last week, after taking suo moto notice, the Supreme Court had stayed demolition of illegal floors of seven buildings in Campa Cola Compound till 31 May 2014.
According to the broad outlines submitted by attorney general Vahanvati before a bench, out of nine structures originally proposed in the complex, only seven have been built, leaving enough floor space index (FSI) for accommodating the present members of the housing society.
Thus space is available for raising a new building. Those who are going to lose their accommodation may be put up in the new structure. The rules regarding FSI have also changed, which would allow the housing of all affected residents, Vahanvati had said.
Noting down the proposal of the attorney general, the SC had granted him time till today to put his proposal in writing. The bench had also asked counsel for the residents, FS Nariman and Mukul Rohtagi, to find out whether the proposal would be acceptable to them.
Earlier, the apex court had set the 11th November deadline to vacate 102 flats declared as illegal.
The apartments in the Campa Cola Compound were constructed on land leased in 1955 to Pure Drinks Ltd. Pure Drinks was later allowed by the BMC in 1980 to build residential apartments. Seven high-rise buildings were constructed at the compound between 1981 and 1989 by developers Yusuf Patel, PSB Constructions and BK Gupta.
Illegal floors of Midtown Apartments, Esha Ekta Apartments, Shubh Apartments, Patel Apartments (two buildings, six floors each), BY Apartments and Orchid Apartments comprise 140 flats. While the builders were granted permission for ground-plus-five floors, Midtown has 20 floors, Orchid has 17, Esha Ekta has eight, Shubh has seven, while BY and Patel have six floors each.