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Neil Borate

@ActusDei

Feb 27

We have a SPIVA report for #mutualfunds, but what about PMS? Using data from PMS Bazaar, Mint has done a similar study. In most categories, less than 50% of PMS strategies beat their corresponding #mutualfund category. To that, add the unfavourable taxation(tax on booked profits)

There isn't much of an argument for investing in Portfolio Management Services. They have largely grown over the past few years on the back of hefty fees and expenses. This is slowly changing. #Sebi banned upfront commissions in PMS and introduced direct plans only in 2020.

There's much talk about the mushrooming of #mutualfund schemes, but the same has happened with PMS - a vast thicket of strategies offered by each manager. Some portfolio managers have done well, but finding them a priori is very difficult. Better to stick with a simple index fund

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Neil Borate

@ActusDei

Feb 25

Apparently there was a feeder fund investing in US debt launched by Franklin in 2003 and shut in 2010. Its mandate was to invest in Government National Mortgage Assn (Ginnie Mae) pass through securities. According to Value Research its return wasn't great

Does that mean the new IDFC Fund will also meet the same fate? I don't know. It was a different time, a different AMC and different securities. We cannot draw parallels, simply based on one commonality - US bond market.

Why am I excited about the IDFC fund? It is because the fund opens up a new market to Indians. It allows you to act on a view that US treasuries in rupee terms will go up or that USD will go up. It sets a precedent. We might get funds tracking 10 yr US bonds or other markets

Read 6 tweets

Neil Borate

@ActusDei

Feb 24

@ananthng

At the #ARIA conference. ARIA is the Association of Registered Investment Advisors of India. Sebi Whole Time Member @ananthng speaking #investing

Says Sebi not looking to disintermediate brokers with regulations such as upstreaming money to clearing corporations. Huge client funds lying with brokers is a risk.

On registered investment advisors (#RIAs)

Read 5 tweets

Neil Borate

@ActusDei

Feb 24

@IDFCMF

It takes one 'killer idea' to make history. Next month, @IDFCMF is all set to unveil one such idea - India's first US bond fund. Why is it so revolutionary? 3 reasons.

First, when the US Fed hikes rates, everything (stocks, bonds, gold) goes down. Only the yields on US treasuries go up. But for Indians there was no straightforward way to benefit from rising treasury yields. From next month, there will be.

The IDFC feeder fund will feed into a JP Morgan fund which invests in US treasuries of 0-1 year maturity. US treasuries have historically high yields, close to 5%. If you add another 3-4% rupee depreciation to it, you have a respectable 8-9% return in rupee terms.

Read 12 tweets

Neil Borate

@ActusDei

Feb 18

Why don't Indians invest in municipal bonds? Municipalities collect property tax and have projects to finance. Our lives are also a lot more affected by municipalities rather than the Union govt. It is they who collect garbage, supply water and keep the roads clean (in theory).

Quite simply, until Indore Municipality came out with a public issue on Feb 14th 2023, municipal bond issues were few and far between. They were also 'privately placed' - offered to select investors. The minimum face value (until Oct 2022) for private placement was Rs 10 lakh.

Indore Municipality's issue is path breaking. Coupon (interest rate) of 8.5% and minimum investment of Rs 10,000 and to be listed on exchanges. If more municipal corporations follow suit, we might one day have a thriving muni bond market.

Read 6 tweets

Neil Borate

@ActusDei

Feb 17

Why are savings rates stuck at 3.5%? Despite being deregulated in Oct 2011, banks have stuck to 3.5-4% over the past decade. Some exceptions existed such as Kotak Mahindra's 811 account which offered 6% in 2017 and 5% from 2018-2020. But these have also disappeared over time.

In today's era of rising rates, this is a free lunch for banks. The lunch was a tiny snack in 2020-21 when rates were cut. Moving money to an FD wasn't that rewarding. You got maybe 1-2% more. Today, that free lunch is a buffet. Savings rates are half of FD rates of even 1 year.

The same gap exists with returns of money market funds. In both cases you give up some liquidity. In case of FDs, a sudden need for money will mean breaking it and losing interest (note sweep-in sweep-out FDs can sort this out).

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