SEBI panel for raising MF's administrative, other expenses

The mutual fund industry has been demanding hiking expense ratio by 0.25% to 2.5% and also doing away with the sub-ceilings within the expense ratio for AMCs

New Delhi: The Mutual Fund Advisory Committee appointed by Securities and Exchange Board of India (SEBI) is understood to have accepted the demand of the MF industry, including hiking expense ratio, at their meeting, reports PTI.

The mutual fund industry has been demanding hiking expense ratio- the percentage of an investor's money that is deducted by the fund house annually to meet its expenses - by 0.25% to 2.5%, sources said.

Besides, the industry had also pitched for fungibility, which refers to doing away with the sub-ceilings within the expense ratio for asset management companies (AMCs), they added.

At present, of the total expense ratio of 2.25% charged by fund houses, 1% is charged as asset management fees. The rest is used to meet custodian charges, advertising and marketing costs and other operating expenses.

Earlier this month, the MF industry had discussed their demands with the officials of Finance Ministry. At the meeting, the industry had also demanded shifting of the 12% Service Tax burden on consumers.

Last month, Prime Minister Manmohan Singh, who also holds the finance portfolio, has said that mutual fund industry was facing problems and something was needed to be done to resolve their issues.

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SEBI to avoid turf war on allowing MFs to enter pension business

The market regulator wants to avoid turf war with other regulators while finalising norms to allow mutual funds to launch pension products

New Delhi: Market watchdog The Securities and Exchange Board of India (SEBI) said it will avoid turf war with other regulators while finalising norms to allow mutual funds to launch pension products, reports PTI.

"We will avoid all turf war (between regulators). After we get the stakeholder recommendation we will go to the board and then take a final call," SEBI Chairman UK Sinha said.

He was speaking to reporters after meeting Planning Commission Deputy Chairman Montek Singh Ahluwalia.

On the meeting with Sinha, Ahluwalia said, "It was a courtesy call, we did not have a structured discussion".

"SEBI will take a direction towards reviving the mutual fund interest in the country and some long-term and medium-term measures will be contemplated in the Advisory Committee meeting," Sinha added.

While the mutual funds are regulated by SEBI, pension falls under the purview of Pension Fund Regulatory and Development Authority (PFRDA).

Earlier, the regulation of Unit-Linked Insurance Plans (ULIPs) created a turf was between Sebi and Insurance Regulatory and Development Authority (IRDA) forcing the Finance Ministry to intervene and resolve the issue.

The mutual fund industry, which is going through a bad patch on account of declining investor interest, wants to launch pension products to attract retirement money. However, taxation and other regulatory issues are delaying the process.

The SEBI meeting comes close on the heels of Prime Minister Manmohan Singh's statement last month that the MF industry is facing problems that needed to be resolved.

Sebi has allowed the mutual fund industry to come out with pension schemes and is in touch with the Finance Ministry to sort out the taxation issues.

The current provisions of the Income Tax Act makes pension products of insurance companies eligible for tax deduction benefits. However, no such benefits are available for MF schemes.

Industry experts said SEBI would have to modify regulations to enable mutual fund houses to launch pension schemes.

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Merrill Lynch Fund Manager survey warns of IT bubble burst

The survey said a sharp drop in expectations of corporate profit growth has weakened investor confidence and global investors have scaled back technology holdings with just 32% of them remaining overweight on IT

Mumbai: American investors have signalled a possible bursting of the IT bubble after the technology sector remained a favourite for global investors in the past three years, says a survey according to a PTI report.

According to the Bank of American Merrill Lynch (BofAML) survey of fund managers for July, technology has been a favourite sector for global investors for the past three years, but US investors have signalled a possible bursting of the IT bubble.

Overall, a net 22% of US respondents to the regional survey are overweight on technology - a sharp fall from a net 41% a month ago. Within those figures, 19% of the panel are underweight IT, up from 9% in June, the survey said.

Global investors have also scaled back technology holdings. A net 32% was overweight on technology, down from a net 41% in June.

US equities have declined in popularity as global asset allocators have cast their net around the world. A net 14% of respondents are overweight on US equities, down from a net 31% last month. At the same time, asset allocators have reduced their underweights in euro zone, UK and Japanese equities.

The survey said a sharp drop in expectations of corporate profit growth has weakened investor confidence.

BofA Merrill Lynch's Growth Expectations Composite has fallen to 37 in July from 43 in June and 54 in May. A severely deteriorating outlook for profits is driving the fall in confidence. A net 38% of investors say corporate profits will worsen in the coming 12 months - compared with a net 19% a month ago, it said.

Expectation that corporates can grow profits by 10% or more is at its lowest point since April 2009. A net 69% of the panel expects corporates profit growth to be less than 10% in the coming year. A net 58% says operating margins will decrease, up from a net 41% in June.

Both broader macro-economic outlook and risk appetite have stabilised after two months of sharp deterioration. A net 13% of the respondents said the world economy will weaken in the coming year, a drop of two percentage points after a fall of 26 points from May to June, said the survey.

BofA Merrill Lynch's Composite Indicator for risk and liquidity rose slightly month-on-month as investors reduced average cash holdings in portfolios to under 5%. Most investors expect further quantitative easing, but few expect this to happen in the third quarter.

Investor perception of risk in the eurozone shifted in July. The proportion of respondents who see the risk of a negative shock around Germany's economy has more than tripled to 32%, up from 10% in June.

Concern about France has risen with a majority of investors (55%) believing the French economy could present a negative surprise this year, the survey said.

Fears that Spain or Portugal could spring a negative surprise have fallen, while expectation of good news from Ireland is growing - 32% of investors hope for a positive surprise from Ireland this year, up from 16% in June.

Confidence in Greece has fallen, however. The proportion saying Greece will avoid exiting the euro fell to 37% from 44%, it added.

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