What Ho!» Mutual Funds

CAMS Web Site Woes

gautamsatpathy — Sun, 25 Jul 2010 08:47:23 +0000

I tried accessing the CAMS web site (http://www.camsonline.com/) today on my BlackBerry and got a rude surprise. Their web site is not at all mobile friendly! Even Opera Mini failed me today on this web site.

Don’t get me wrong – I am a big CAMS fan and regularly use their excellent mailback services to keep track of my offline mutual fund investments. They added Karvey as a data source some time ago and blew me away. I was very happy to get all my data in one place and stopped visiting Karvey’s web site.

However their web developers suck big time. Browser compatibility has always been an issue – I have to use Internet Explorer! It leaves me frightened every time I visit them. Their main supported browser is the worst browser available. Also their web site uses lot of frames, JavaScript and other 1990s web technology. Which shows that they need a new IT Group – people who know what they are doing and have a good understanding of web technologies.

CAMS is a classic example of a great business model with a flawed implementation. You will never get good ouput if you don’t have good people. And good people are not only hard to come by, they are also expensive.

Are they worth the price to CAMS?

Update:
The web site actually worked. I received the statements I wantd but the site did not seem to be working so I ended up with 7 copies of each statement in my mailbox! Opps…

Posted with WordPress for BlackBerry.

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Mutual Fund NAVs – Ignore Them!

gautamsatpathy — Fri, 08 Jan 2010 16:20:03 +0000

Mutual Fund NAVs are often confused by new as well as old investors.

Mutual Fund Agent to Client: “The New Fund Offer (NFO) is priced at Rs. 10/-. It is Cheap! Buy! Buy! Buy!”

Mutual Fund Investor:

“Is it advisable to buy mutual funds with a high NAV?”

“Mutual Fund ABC has a high NAV of around Rs 423. Is it a better option? How much more can this go up?”

“What is the maximum value to which a NAV can go to?”

Common questions? Unfortunately yes.

The NAV of a Mutual Fund is not the same as the price of a share or commodity. It is the net value of the assets of the fund minus its liabilities like AMC fees etc divided by the number of units of the fund sold to its investors.

NAV = (Assets of the Fund – Liabilities) / Number of Units

So what does that mean? It means that you can safely ignore the NAV of a Mutual Fund when trying to decide whether it is good investment.

Lets see why:

Lets say we have two funds, ABC & XYZ. Also, lets say you have invested Rs. 10,000/- in each and that both funds go up 5%.

Okay, now for the numbers…

The fund with the “Expensive NAV”…

Mutual Fund:	ABC
NAV:	Rs. 200/-
Investment:	Rs. 10,000/-
No. of Units you Own:	10,000 / 200 = 50 Units
Increase (5%):	Rs. 10/- (5% of 200)
New NAV:	Rs. 210/-
New Value of Investment:	50 Units * 210 = Rs. 10,500/-

Now for the fund with the “Cheaper NAV”…

Mutual Fund:	XYZ
NAV:	Rs. 20/-
Investment:	Rs. 10,000/-
No. of Units you Own :	10,000 / 20 = 500 Units
Increase (5%):	Re. 1/- (5% of 20)
New NAV:	Rs. 21/-
New Value of Investment:	500 Units * 21 = Rs. 10,500/-

What does this show us?

That we gained 5% in both funds. Our investment of Rs. 10,000/- grew to Rs. 10,500/- in both cases!

So you can safely ignore the NAV of a Mutual Fund. It has no meaning in terms of “Expense”.

To determine whether a particular fund is a good buy you must look elsewhere:

What are your investment objectives? What is the fund’s investment objectives? Is there a match?
What is the fund’s investment style? What is the Risk versus Return? Does it match your risk profile?
What is the fund’s track record? Has it down well in all kinds of markets?

Ultimately you must decide what you are looking for and compare that with what the fund offers.

Go visit Value Research.

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ICICIDirect Trying To Trick Retail Mutual Fund Investors, Again!

gautamsatpathy — Sat, 01 Aug 2009 17:04:35 +0000

ICICIDirect is know for it’s shady practices. They are at it again with the SEBI ruling on Mutual Fund Entry Loads which comes in to effect today (August 1, 2009). I will show you how they are out to confuse people and how their entire approach is crafted to benefit the rich customers at the expense of the average Raju.

I am customer of ICICIDirect. Yes, I know. Pathetic. I signed up in late 2004 and since I was primarily a Mutual Fund investor I stayed with them even though they are the worst in terms of transparency and the amount of money they suck off the customer by confusing them.

They are at it again and I am spending this weekend revisiting all my ongoing “SIPs” through ICICIDirect. It started with an email from ICICIDirect on July 29, 2009. You can see the entire text of the message in the image at the bottom of this post. It is a long email with examples and references to the SEBI ruling.

They present the investor with two scenarios. The first is for people who have a corpus of more than 8 lacs invested in Mutual Funds through ICICIDirect. All such investors will not be charged anything for their mutual fund purchases.

Okay. So far so good. If you are rich and have a pot of rupees invested via ICICIDirect then you are in luck.

Now lets look at the rest of the email and see the second scenario for the rest of us poor investors trying to make money on the stock markets. For all such investors ICICIDirect will charge a “Flat Rate”.

For Regular MF Unit Purchases (called “Lumpsum Investments”): Rs. 100/- per transaction.
For SIP based MF Unit Purchases: Rs. 30/- per transaction.

ICICIDirect has provided a very nice example:

Lots of savings, no? Very very magnanimous of ICICIDirect, no?

Actually no.

How many people put in Rs. 10,000/- a month is a single SIP? I don’t. I put in more than that a month but not in a single transaction. I invest in a number of funds each month. The amounts vary between Rs. 1000/- to Rs. 3000/- per fund. Lets say my total is Rs. 10,000/- per month in 5 funds, distributed as follows:

So what would be the Entry loads I would pay before and the new commissions I will pay after Aug 1, 2009?

Do you see it now? For the last two SIPs I will actually pay more to ICICIDirect than I would have under the old Entry Load structure!

Why is that?

So any transaction below Rs. 1333.33/- will hurt the investor. That is the “Break Even” point where you pay the same amount as you did before.

In my experience most retail investors put in monthly SIPs in the Rs. 1000/- range. And I expect most of them will not read through the long email from ICICIDirect and will not do such a calculation. They will end up paying ICICIDirect at 3% instead of the old 2.2.5%. And since ICICIDirect has already sent all investors a nice long email as per SEBI’s ruling they are not liable for any mistake on the Investor’s front. No money will be refunded if you, the investor, do not read through the email carefully and analyze the details.

The richer investors will be happy. They will pay less. The poorer, as usual, will pay a price for the “privilege“ of investing in Mutual Funds via ICICIDirect.

So the Distributers are happy. They still have their collective Pricks up the investor’s A Holes.

I thank SEBI for taking up the cudgel on behalf of the retail investor. However I think SEBI needs to pay more attention to it’s homework. Because in the end it is the poor investor who pays the price.

Links

SEBI’s Circular regarding Mutual Fund Entry Loads: http://www.sebi.gov.in/circulars/2009/imd_cir_3009.pdf, Also available here.
The Excel calculations spread sheet I used.
ICICIDirect

The email sent by ICICIDirect -

_1_2009" src="http://whatho.satpathy.org/wp-content/uploads/2009/08/ICICIDirectCheatingRetailMFInvestors_Aug_1_2009_thumb.png" width="118" height="481" />

Please read between the lines, do a little homework before you spend your money.

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What's Up With Sandip Sabharwal?

gautamsatpathy — Mon, 02 Mar 2009 04:24:01 +0000

Sandip Sabhawarl, a IIT Delhi graduate, won kudos with his management of SBI’s Mutual Funds, particularly the Magnum Contra and similar funds. Then came the Ketan Parekh and Padmini Technologies stock purchase from Triumph International. Sandip left SBI under a cloud and joined JM Financial Asset Management. The Mutual Fund industry and press reacted with caution. The CBI Charge Sheet against Sandip loomed heavy. Yet there was expectation that he would work the same magic for JM that he did at SBI.

Now I read that Sandip has left JM (Feb 27, 2009). Where will fortune take him now? Is he a good guy caught up in the vortex or is he a bad-one?

I intend to follow this man’s career or what ever is left of it. Let’s see what life throws at him and how he bats in response.

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SEBI & Mutual Funds – No load on Bonus and Reinvestment of Dividend

gautamsatpathy — Thu, 20 Mar 2008 16:49:52 +0000

Starting April 1, 2008, Mutual Funds can no longer charge entry & exit loads for Bonus & Dividend Reinvestments. SEBI issued a new circular on March 18, 2008 to this effect. This move is based on recommendations from AMFI’s Working Group on Standardization of Key Operational Areas.

This is a welcome move. Dividends and Bonus are not new purchases. They come from the investor’s money. So why should the investor be made to pay a price?

Thanks SEBI.

(Business Standard has an article about this)

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Clerical Error – CAMS Has Done It Again!

gautamsatpathy — Thu, 20 Mar 2008 13:10:22 +0000

CAMS has done it again. Or rather the chapies who man the Hyderabad / Secunderabad CAMS office have. And this time I have had enough. I will follow the process, write to customer support etc but I will also use their “Email the CEO” thing and keep my fingers crossed.

Last Saturday, March 15 2008, I went to Secunderabad to submit a SIP application for DSPML India T.I.G.E.R Fund. The request was processed and I received my statement today. As is my wont I went through the thing carefully. And immediately noticed that the email address registered against the folio is wrong. Instead of gautam AT satpathy DOT org, the fools have entered gautam AT gsatpathy DOT org!

Last time they miss-spelled my wife’s name (nominee) as well as mine. Satpathy became Satpatny. The time before that they made a mistake in my address. C51 became C55. And the time before that they rejected a SIP application because the cheque was postdated even though the process specifically stated that postdated cheques were accepted for SIPs only. They finally accepted the SIP application but that meant another trip to Secunderabad.

Looking back I find that I have visited the Secunderabad CAMS office almost every Saturday since mid January 2008. And more than half of those trips were completely unnecessary. Some fool at CAMS makes a mistake and I pay the price.

As I said, this time I was pissed. I went to their web site looking for the customer support number. The toll free numbers didn’t work (no such number). Next I tried the CAMS office at Secunderabad. No answer to either of the two numbers listed on the web page.

Frustrated I clicked the Complaints link and filled out the form. Of course the form submission didn’t work.

Click image for full size picture.

I finally decided to post it here. And write to the CEO. Let’s see is that will get some response.

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Sundaram BNP Paribas Mutual Fund – Online Transactions

gautamsatpathy — Mon, 25 Feb 2008 19:18:35 +0000

Sundaram BNP Paribas Mutual has put up a new web page for online transactions. In it they promise to provide a Direct Payment Gateway for online Mutual Fund Purchases, thereby enabling investors to avail the new No Load option given to direct purchases from the AMC.

A welcome move! I look forward to using the service when it is available.

Till then you will have to put in a hardcopy request the traditional way to avail the No Load option. This means filling out the form, signing a cheque and driving down to the nearest Sundaram or CAMS office.

For Hyderabad the Sundaram office is at:

V V Vintage Boulevard
F.No.203, 2nd Floor,
Raj Bhavan Road,
Somajiguda,
Hyderabad 500082
Ph: 040-23393669/23390815/23397600
Fax: 040 23390815

And the CAMS office at:

102, First Floor
Jade Arcade
Paradise circle
Secunderabad – 500 003
1901-425-2267
040-3918 2471, 73
Fax : 040-3918 2472

Do remember that CAMS is open only till 1.00 p.m. on Saturdays. I think they open for business at 10.00 am.

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ICICI's PruTracker – Analyze Scheme Performance

gautamsatpathy — Thu, 14 Feb 2008 02:07:42 +0000

ICICI Prudential Mutual Fund is one of India’s leading AMCs. They manage a lot of money (AUM) and are innovative in their product offerings. They also have a good track record of technology use. Their web site was one of the first to offer direct purchase of Mutual Fund units as well as portfolio tracking.

The PruTracker is a good product though it lacks some fundamental features, particularly on the usability side but that is another post

Of late I have been using their web site a lot and thought I would write about my experience. Late yesterday night I stumbled upon their Analyze Scheme Performance page. This page lets you select a Mutual Fund from ICICI Prudential’s stable, give a date range and select a Performance Measure for analysis. Available measures are:

NAV History
Dividend History
Performance Simulator
Comparison vs Benchmark

I decided to take the Performance Simulator for a spin.

ICICI Prudential FMCG Fund (Click picture for full size image)

What you get is analysis for a single lump sum investment on the start date and an analysis of a monthly SIP between the start and end dates.

Performance Simulator
If you had invested Rs. 1,000.00 on 31-03-1999 (dd/mm/yyyy) in the chosen scheme, then the value would have become Rs. 4,663.00 on 13-02-2008 (dd/mm/yyyy). The corresponding dividend amount paid would have been Rs. 0.00 . Your gain/(loss) would have been Rs. 3,663.00.

Systematic Investment Plan (SIP) Simulator
If you had invested Rs. 1,000 in the SIP option of the chosen scheme (on a monthly frequency), starting on Mar-1999 , then your value would have become Rs. 4,11,486.00 by Feb-2008 a return 28.83 % ( CAGR ). Your gain/(loss) would have been Rs. 3,03,486.00 , on a total investment of Rs. 1,08,000.00.

Note that this screen defaults to the launch date of the fund for start date and today’s date for the end date.

The information returned is useful to some extent. It tells you how the fund has performed over the time period selected. Note that this is real performance (based on certain assumptions) and not a projection.

I then decided to try out a couple of other ICICI Prudential funds I invest in.

ICICI Prudential Power Fund (Click picture for full size image)

ICICI Prudential Infrastructure Fund (Click picture for full size image)

The Analyze Scheme Performance functionality of the PruTracker is a good way to understand performance and compare similar schemes over the same period of time. For the sake of this article I have used the same three funds as above for performance comparison.

Now, FMCG, Power & Infrastructure are all Equity Diversified funds but have very different objectives, investment styles & portfolio capitalization. As a result you cannot compare their performance against each other.

Caution: Do not use this information to make investment decisions. As noted above these funds are totally different from each other and this is not a valid comparison for investment decision making. This is done here for illustration only.

The first thing is to ensure that the comparison is for the same time period. The Infrastructure fund is the newest (launched Sept 9, 2005) and hence I used that as the start date for all there funds. Left the end date as Feb 13, 2008 (yesterday) for all three funds. See the results below:

ICICI Prudential FMCG Fund – Sept 9, 2005 to Feb 13, 2008 (Click picture for full size image)

ICICI Prudential Power Fund – Sept 9, 2005 to Feb 13, 2008 (Click picture for full size image)

ICICI Infrastructure Fund – Sept 9, 2005 to Feb 13, 2008 (Click picture for full size image)

Results:

	SIP Amount	Total Investment	Value	% Return (CAGR)
ICICI Prudential FMCG Fund	Rs. 1,000/-	Rs. 30,000/-	Rs. 38,629/-	22.17%
ICICI Prudential Power Fund	Rs. 1,000/-	Rs. 30,000/-	Rs. 41,759/-	29.56%
ICICI Prudential Infrastructure Fund	Rs. 1,000/-	Rs. 30,000/-	Rs. 54,126/-	56.14%

The results are interesting and when used to compare similar funds can provide good information for investment decision making.

You can also use the Value Research web site to analyze these funds:

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Bye Bye Entry Loads!

gautamsatpathy — Wed, 23 Jan 2008 19:32:19 +0000

See the screen shot below for my most eagerly awaited Mutual Fund Account Statement

Notice the NAV & the Price in INR columns. The last transaction dated 14/1/2008 is the sweetest. No Entry Load!

I have already canceled most of my ICICIDirect SIPs. So far I have been able to take care of only a part of my portfolio by creating SIPs offline. The rest will be completedby the end of Jan 2008.

Hip! Hip! Horray! No Entry Load!

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ICICIDirect's New Message On Mutual Fund Purchase Page

gautamsatpathy — Mon, 21 Jan 2008 23:32:33 +0000

The new direct sales no-load criteria for Mutual Funds in India came into effect on January 4, 2008. Under this investors are not charged an entry load if they purchase directly from the AMC. The operative word is “direct”.

I have seen a lot of discussion on this issue on our internal mailing lists at work and elsewhere on the web. A lot of people seem to be confused about what “direct” means. The word was taken to mean “online” by a large section of people. The experts quickly pointed out that there is a distinction between purchasing mutual fund units on the web site of the AMC vs. buying the same units from a brokerage house like ICICIDirect.

Anyway, I recently logged into the ICICIDirect web site to purchase units in a short term floating rate fund from Chola and I noticed that they have posted a new message on the Mutual Fund Purchase page (see screen shot below).

Notice the paragraph highlighted in blue? It clearly states that they are brokers and hence are entitled to their pound of flesh.

I noticed this on Jan 15, 2008, a good 10 days after the new rules came into force and am not sure when they posted this message. On Jan 4? Or later after their customer support was flooded by mistaken but nevertheless angry customers complaining about the entry loads charged on their purchases?

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