Property Market is buzzing once again, and investor activity has gone up. But there are risks.

Seven Risks of buying under construction property (UCP)
Thread🧵

Do retweet to increase the reach I am not a real estate expert, then why I am writing something on a very complex topic.

With effect from 01st January'2021, all the existing schemes and all schemes to be launched on or thereafter will follow the new guidelines for product labeling (Risk-o-Meter)

Sixth level of Risk added as "Very High Risk"

Old and New Proposed Riskometer in image

(Small Thread) Risk-o-meter shall be evaluated on monthly basis & AMC shall disclose it along with portfolios on website and on AMFI website within 10 days from the close of each month

Changes shall be communicated by way of Notice cum Addendum & by way of an e-mail or SMS to unitholders.

I have read a lot of criticism for Dynamically Managed Equity Funds.

Small Thread

Debate is asset allocation at scheme level or Asset Allocation at Client (Advisor) level.

I think, instead of choosing one, both can be a good choice. Asset Allocation at scheme level
+pass through taxation for rebalancing
+ no exit loads for rebalancing
+ No emotions involved, model based.
+ Higher risk adjusted returns
- fixed income allocation has no mandate

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Second Order effect on Fund of Funds of @FTIIndia due to Wind Up of 6 debt schemes

An accident or an opportunity

Valuation Committee decided to provide an illiquidity discount and fair value these 6 fixed income schemes at 50% of their daily NAV, held in FoF structure. NAVs for FoFs were marked down on 24th April'2020, just a day after the decision to wind up six schemes was taken.
Below tables highlights the single day impact on NAV in these schemes:

Investors have seen what illiquidity in underlying instruments can do in debt schemes

Please note same applies to small/mid cap equity schemes

Biggest scheme by AUM in these categories will find it difficult in case of sustained redemption pressure.

https://twitter.com/iRadhikaGupta/status/1257256362544775170

small schemes in these categories should be choosen over branded Big Elephants.

Fund managers have already over diversified in those schemes, look number of securities in those schemes

Look average daily volumes of top 10 holdings and see how many days will it take to liquidate

RBI Cancels Licence of CKP Co-operative Bank; Depositors to Get Up to Rs 5 Lakh news18.com/news/business/… 👇

#mutualfunds

As we all were discussing franklin saga, another accident was waiting to happen. Principal Mutual Fund, marked down the DHFL to zero. DHFL was downgraded to D on 04th June'2019

All AMCs took 75% haircut as per the standard haircut for sub-investment grade securities finalised by the @amfiindia valuation committee

on 7th June, @utimutualfund marked down their DHFL exposure to zero.

Relaxation in compliance with requirement pertaining to mutual funds

Small Thread

On 20th Sept'2019, @SEBI_India came up with decisions for Risk management framework for liquid and overnight funds. The provision were to be effective from 1st Apr'2020

sebi.gov.in/legal/circular… following was decided:

1) Liquid funds shall hold at least 20% of its net assets in liquid assets (Cash, Gov Sec, T-bills and Repo on Gov Sec)

2) Liquid Funds & Overnight Funds shall not park funds pending deployment in short term deposits of scheduled commercial banks

Through a notice dated April 23 the Trustees of @FTIIndia announced their decision to wind up 6 schemes, by now, we all know the scheme names.

FOF schemes of the same AMC also got affected as these were holding 1 or more schemes that are in winding up

https://twitter.com/stepbystep888/status/1254012454259945472

Investors/distributors soon started redeeming across most of the categories of debt schemes, PANIC !

Credit Risk Schemes were worst affected specially after the Franklin event.
Below are the scheme wise AUM for credit risk category on different dates.

debt funds

small thread

Investors believed debt mutual funds are safe and can be replaced with Fixed Deposit. In September 2018, after the IL&FS fiasco, Indian investors realized how debt mutual funds are different than fixed deposit & there are risk associated.

#mutualfunds Since September 2018 a lot of issuers have been downgraded to D by the rating agencies. D means default, it means payment has not been made on time. Please note mutual funds follow “one day one rupee” default rule. Following is the list of default from September 2019.

Fixed Maturity Plans (FMPs)

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FMP Vs. open-ended debt fund
life cycle of a FMP
no of FMPs Launched & AUM Mobilized
taxation & indexation
Once the darling of AMCs, Mutual Fund Distributors, Wealth Management firms, HNIs & Corporates, why it has lost its sheen.
#mutualfunds Let’s start by looking at the difference between a fixed maturity plan and an open-ended debt fund.

The Finance Act, 2020 has removed the levy of DDT in the hands of the Mutual Fund and adopted the
classical system of dividend taxation under which the Mutual Funds would not be required to pay DDT.
The dividend shall be taxed only in the hands of the unitholders.

#mutualfunds w.e.f. April 1, 2020 for FY 2020-21, all types of mutual fund schemes under dividend payout and dividend reinvestment option shall be required to deduct 10% TDS on the dividend income at prescribed rates for all unitholders i.e. resident/non-resident/FII/FPI.

ELSS offers an investor to claim tax deduction under section 80C. Please note this is not an additional deduction it is within the limits of 150,000 per annum.

lets now deep dive into the category wise (retail, HNIs and Corporate) plan wise (direct & regular).

#mutualfunds
#80C

https://twitter.com/stepbystep888/status/1245653296678719490

18530 crore retail AUM have decided not to invest in PPF/EPF/VPF but to allocate in ELSS.

opportunity cost & what retail can do: explained👇

https://twitter.com/stepbystep888/status/1245653523112407040

Asset Weighted Expense for these schemes (regular mode)👇

https://twitter.com/stepbystep888/status/1245654007332257800

category wise mutual fund schemes performance.

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Please note, most of the investors do investing using rear view mirror (past performance).
look at the size of front windshield (it tells you what is coming) Vs. rear view mirror which tells you what has passed.
#mutualfunds large cap funds:

post the SEBI categorization & rationalization, large cap schemes have to maintain minimum 80% of total assets in large cap companies

the circular also defined the definition of Large Cap.
Large Cap: 1st -100th company in terms of full market capitalization

my random thoughts on small & midcap mutual fund schemes:

1) I do not know why a small cap fund has so many stocks, 111 to be exact, looks like the Fund Manager is firing all over the place.

now read the famous quote of Sir Peter Lynch below is the performance comparison of small cap schemes from 01 Jan'2018 to 29th March'2020.

larger AUM schemes have performed poorly, reasons:
1) Impact Cost
2) constrained inability to exit illiquid stocks
3) not enough flexibility in portfolio construction

they are lucky enough that closed ended funds don't need segregation ;-)

https://twitter.com/passivefool/status/1236257201812992000

@NipponIndiaMF is leading ;-)

@DrSatyendra123 @ICICIPruMF both.
please note there is a difference between both the products.
index fund is 100% equity whereas Bal Adv. is dynamically managed.
below are the unhedged equity levels of ICICI BAF @ICICIPruMF @ICICIPruMF BAF unhedged equity levels on a graph

I have received a lot of messages regarding ICICI Pru Balanced Advantage Fund.

A small thread on some of the questions.

https://twitter.com/stepbystep888/status/1230085749850157056

Question 1: What are balanced advantage funds?

As the name suggests, these schemes dynamically manage the equity and debt allocation based on the market conditions. All AMC has defined their strategy in SID.

How allocation to bad assets increases with declining AUM

Basically, AMC has to sell good assets to meet redemption payouts and allocation to bad assets keep on increasing.

A small thread taking UTI Credit Risk Fund and underlying holding Vodafone/Idea as example
#mutualfunds In Feb’2017, the scheme bought 650 debentures of “8.04% UNSECURED REDEEMABLE NON-CONVERTIBLE DEBENTURES. DATE OF MATURITY 27/01/2022” from secondary market.
AA+
Allocation in scheme = 2.6445%; AUM ~ 2433 cr
#vodafoneidea

Guidelines for #PMS:
*Fees*
1) no upfront fees shall be charged (directly/indirectly)
2) Brokerage at actuals shall be charged
3) Operating exp shall not exceed 0.5% p.a. of avg daily AUM (excl brokerage & mgnt fees)
4) Exit load not more than
3% yr 1
2% yr 2
1% yr 3
NIL, yr 3+ *Direct option in PMS*
1) a direct option to clients without intermediation of distributors
2) prominent disclosure of direct option in its Disclosure Documents, marketing material and on its website
3) no charges except statutory charges shall be levied from direct client

borrowing for wrong reasons:

1) paying bills
looks like online payment of bills through credit cards have been captured in this. as long as the cc holder cleared dues on time, its not a concern for your financial planner. weddings:
notice for weddings is not immediate, parents know in advance that after 20-25 years they need money for marriage.
it reflects poor or no financial plannings on their behalf.