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Mutual Funds Asset Class Returns 31Mar2023 - vrk100 - 01Apr2023

Mutual Funds Asset Class Returns 31Mar2023

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This is an update of an earlier blog posted on 31Dec2022. Now, I present the data as at the end of 31st of March, 2023. The data contain select categories of mutual funds in India, numbering sixteen, from equity, debt and commodity (gold) categories.

Table 1: Asset return matrix - annual returns (top to bottom returns in 2022) >

Please click on the image to view better >

(the blog continues below)

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Related Blogs on Mutual Funds:

Understanding Corporate Debt Market Development Fund (CDMDF)

Negative Impact of Debt Mutual Fund Tax Changes

EPFO Investments in Stocks Via ETFs

Why Do Indian Equity MFs Always Disappoint Investors?

Indian Mutual Funds and the Art of Ripping off Investors

Who is Eating My Gold ETF Return?

Mutual Fund Asset Class Returns 31Dec2022

Mutual Fund Asset Class Returns 30Jun2022

Mutual Fund Asset Class Returns 31Mar2022

Mutual Fund Asset Class Returns 31Dec2021

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What the above table 1 reveals is:

> asset classes are cyclical in nature

> gold ETFs continues to do well in first quarter, continuing the success of 2022

> gold provided the highest return in the first quarter of 2023 compared to other asset class mutual fund returns in the above table

> Equity International category of mutual funds provided the worst return in 2022, but in the first quarter of 2023, they provided the second best return after gold

> if you look closely at the data, you can get more insights

The above table 1 is presented below, with the same data, but in alphabetical order >

Table 3: Asset return matrix - trailing returns (10-year returns top to bottom) >

Please click on the image to view better >

What Table 3 reveals is:

> Small-cap equity funds have provided best returns on a 10-year trailing returns basis, though they have provided no returns as a category in the past one year

> on a 10-year trailing basis, equity mid-cap and flexi cap funds too have provided inflation-beating returns

> Gold, arbitrage and credit risk funds have provided poor returns on a 10-year trailing basis

The above table 3 is presented below, with the same data, but in alphabetical order >

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References:

Important information relating to SEBI categorization and rationalization of mutual fund plans introduced in 2017:

SEBI circular dated 06Oct2017

SEBI circular dated 04Dec2017

Tweet 15Apr2018

Tweet 26Jun2018

Several Tweets

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Global Market Data 31Mar2023

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Natco Pharma Buyback Offer 2023

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Weblinks and Investing

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Disclosure: I've vested interested in Indian stocks and other investments. It's safe to assume I've interest in the financial instruments / products discussed, if any.

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Global Market Data 31Mar2023 - vrk100 - 01Apr2023

Global Market Data 31Mar2023

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(please look at the blog dated 16Jan2023 for data from 2012 to 2022)

Quarter-to-date global market data, as on 31 March 2023, of stocks, bonds, currencies and commodities is as follows:

Table 1: (please click on the image to view better)

Between 31Dec2022 and 31Mar2023, global stock markets recovered. Nasdaq Composite led the way with a return of 16.8 percent for the first quarter of 2023. S&P 500 index rose by 7 percent, Dax 30 increased by 12.2 percent and Nikkei 225 delivered 7.5 percent.

Indian stocks disappointed with Sensex giving a negative return of 3 percent. It may be mentioned Sensex showed resilience in 2022 while most of the leading stock indices declined sharply. This calendar year, Sensex has been underperforming the global peers.

WTI crude declined by 6 percent, gold is up 8.6 percent and Bloomberg Commodity Index is down 6.5 percent in the first quarter of 2023.

The outlier is Bitcoin, which delivered a spectacular return of 72 percent in the quarter. (Bitcoin fell by 65 percent in 2022)

In recent months, inflationary expectations have been abating in major countries, including the US and the Euro area. In fact, inflation rates have declined in major developed markets. This has prompted markets to speculate about the US Federal Reserve reducing its federal funds rate in the second half of 2023.

The speculation about the Fed cutting rates has led to a rally in the US technology stocks and other markets too followed suit.

The US 10-year Treasury yield declined by 41 basis points in the quarter. The 2-year Treasury yield too fell sharply.

Year-on-year (past 12-month returns) global market data as on 31Mar2023 are presented below:

Table 2: (please click on the image to view better)

One-year returns (between 31Mar2022 and 31Mar2023) are as follows: Nasdaq declined by 14 percent, Dax 30 rose by 8.4 percent and Sensex was almost flat.

The US 10-year Treasury yield rose sharply by 237 basis points (100 basis points equal one percentage point) to 3.47 percent as on 31Mar2023. The 10-year India G-Sec yield increased by 88 basis points.

Crude oil, Bloomberg Commodity Index and Bitcoin have shown considerable decline in the past one year.

The US dollar index (USDX) increased by 4.3 percent.

The market speculation about the Fed easing its tight monetary policy has resulted in the recent rally for stocks. China lifting its COVID-19 restrictions too has sent positive signals to world growth prospects.

But as uncertainties around Russia's invasion of Ukraine, liquidity problems in the US and European banks, fears about de-globalisation and the US-China trade tensions continue to weigh on markets. Maybe, caution is the buzzword.

- - -

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Understanding Corporate Debt Market Development Fund (CDMDF)

A Brief Outline of Dixon Technologies (India) Ltd

General Market Chatter

Negative Impact of Debt Mutual Fund Tax Changes

Emami Limited Buyback Offer 2023

When Is The Next Buyback Offer Likely To Be?

Ajanta Pharma Buyback Offer 2023

Natco Pharma Buyback Offer 2023

When Will US Federal Reserve Stop Hiking Interest Rates?

Why Do Indian Equity Mutual Funds Always Disappoint Investors?

Adani Stocks Meltdown and Nifty Next 50 Index

Are Indian Stocks Immune to Adani stock Meltdown?

Meltdown in Adani group Listed Stocks

Indian Stock Market Moves Fully to T+1 Settlement

India Up the Ladder in MSCI EM Index

New Rules on Ex-date and Record date

Weblinks and Investing

-------------------

Disclosure: I've vested interested in Indian stocks and other investments. It's safe to assume I've interest in the financial instruments / products discussed, if any.

CFA Charter credentials - CFA Member Profile

CFA Badge

He blogs at:

Thursday, 30 March 2023

Understanding Corporate Debt Market Development Fund (CDMDF) - vrk100 - 30Mar2023

Understanding Corporate Debt Market Development Fund (CDMDF)

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Background to Debt Market Development Fund

Back in Apr2020, Prof. Jayant R Varma proposed setting up of a guarantee fund to protect the unitholders of debt mutual funds in the event of any financial troubles in the corporate debt market.

Debt mutual funds area a vital cog in the Indian financial system. They provide funding for coporates, banks and non-financial banking companies (NBFCs) and play an important role in corporate debt markets.

As argued by Prof Varma, some sort of a sovereign backstop is needed for the debt mutual funds in the larger interest of financial stability and giving fillip to a vibrant debt market in India.

The suggestion from Prof Varma came in the backdrop of winding up, in April 2020, of six debt mutual fund schemes by Franklin Templeton India Mutual Fund. The Franklin Templeton debt funds fiasco caused a major upheaval in the debt mutual fund industry in 2020 and caused temporary losses (in fact, permanent losses for many) for debt fund unitholders in an awful way.

In 2020, debt mutual fund schemes in India faced huge redemption pressures, due to downgrading of debt instrements of some debt-ridden corporates. Between 2018 and 2020, heavily-indebted firms in India faced debt servicing problems in the aftermath of COVID-19 Pandemic and collapse of IL&FS (Infrastructure Leasing and Financial Services) in 2018.

Fast Forward to Now

Securities and Exchange Board of India (SEBI), India's capital market regulator is proposing to set up a Corporate Debt Market Development Fund (CDMDF).

In a press release dated 29Mar2023, SEBI says the CDMDF will be in the form of an Alternative Investment Fund (AIF) and acts as a backstop facility for purchase of investment-grade corporate debt securities during times of financial stress.

Initial corpus for CDMDF will come from debt mutual fund schemes and asset management companies (AMCs).

In times of market dislocation, the fund (based on a guarantee from National Credit Guarantee Trust Company or NCGTC) will buy corporate debt securities from debt mutual funds and provide liquidity to the debt funds.

Such a guarantee fund will provide a relief to debt mutual funds and prevent any redemption pressures in times of panic.

A screenshot of the relevant information >

Various media reports on 29Mar2023 suggested the CDMDF will have an initial corpus of Rs 3,000 crore being funded, inter alia, by AMCs and debt mutual fund schemes -- and the fund will have ten times leverage and sovereign guarantee through NCGTC.

It is expected the move by SEBI to set up CDMDF will boost investor confidence in Indian debt mutual fund industry.

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P.S.: The following weblinks / references have been added after the blog was posted on 30Mar2023 >

06Sep2023 SEBI circular - clarification regd investment by mutual fund schemes and AMCs in units of CDMDF

28Jul2023 PIB press release - Finance Minister today inaugurated CDMDF and initiated the trading on the limited purpose clearing corporation (LPCC) called AMC Repo Clearing Corporation Ltd (AMC RCCL) - LPCC and AMC RCCL to provide triparty repo services and central counterparty (CCP) services -

Excerpts from above press release >

Backstop Facility:

The Department of Economic Affairs, Ministry of Finance, Government of India, has notified the establishment of ‘Guarantee Scheme for Corporate Debt’ (GSCD) for the purpose of providing guarantee cover against debt to be raised by Corporate Debt Market Development Fund (CDMDF) which will act as a backstop in the corporate debt market, in times of market dislocation. The genesis of backstop facility was set forth as part of the Union Budget 2021-22 announcement.

The GSCD is envisaged to be managed by the Guarantee Fund for Corporate Debt (GFCD), a Trust Fund formed by DEA with a corpus of Rs 310 crore. The GFCD will be managed by National Credit Guarantee Trustee Company Ltd. (NCGTC), a wholly owned company of the Department of Financial Services (DFS), Ministry of Finance, Government of India. The Trust would provide guarantee cover for loans not exceeding Rs. 30,000 crore, to be raised by CDMDF during times of market dislocation. NCGTC will give the guarantee as a standing facility, initially for 15 years. The SEBI Board shall decide the trigger of debt market disruption warranting the Backstop Facility to operate in times of market dislocation and consequently the need for activation of the guarantee by the NGCTC.

CDMDF is notified as an Alternative Investment Fund (AIF) in the form of a Trust under SEBI (AIF) Regulations. It would purchase investment grade debt securities both in stressed and normal times and help in development of the bond market. The units of CDMDF shall be subscribed by Asset Management Companies (AMCs) of Mutual Funds (MFs) and “specified debt-oriented MF Schemes.

Limited Purpose Clearing Corporation:

As another initiative to deepen corporate bond markets, the Limited Purpose Clearing Corporation (LPCC) named as AMC Repo Clearing Corporation Limited started functioning with the first transaction done today. LPCC has been set up with the purpose of clearing and settlement of corporate bond repo transactions and to develop an active repo market, which will, in turn, improve liquidity in the underlying corporate bond market. This institution will create a vibrant corporate bond repo market that allows market makers to access cost effective funding for their inventory, that allows holders of bonds to meet their short term liquidity needs without having to liquidate their assets and the opportunity to entities with short term surpluses to deploy their funds in a safe and efficient manner, can all be achieved through this institution.

27Jul2023 SEBI circular - Investment by Mutual Fund Schemes and AMCs in units of CDMDF -

-- CDMDF shall be launched as a closed end scheme with an initial tenure of 15 years (extendable) from the date of its initial closing (date on which contribution from all AMCs and specifiedschemes is received by CDMDF)

-- The units of CDMDF shall be subscribed by AMCs of Mutual Funds and “specified debt-oriented MF Schemes” (i.e., Open ended Debt oriented Mutual Fund schemes excluding Overnight funds and Gilt funds and including Conservative Hybrid funds) - index funds and ETFs are also excluded

-- Specified debt-oriented MF Schemes shall invest 25 basis points (bps) of their Assets Under Management (AUM) in the units of CDMDF. The specified MF schemes shall provide additional incremental contribution to CDMDF as their AUM increases, every six months to ensure 25 bps of scheme AUM is invested in units of CDMDF. However, if AUM decreases there shall be no return or redemption from CDMDF

-- AMCs shall make a one-time contribution equivalent to 2 bps of the AUM of specified debt-oriented MF Schemes managed by them

27Jul2023 SEBI circular - Framework for Corporate Debt Market Development Fund - CDMDF -

24Jul2023 BL: Finance Minister to launch Rs 33,000 crore backstop fund bonds on Friday - CDMDF - AIF (alternative investment fund) - CDMDF to be managed by SBI Asset Management Company -

27Jun2023 SEBI - Memorandum to SEBI Board - Framework for CDMDF - backstop facility - comparison of CDMDF with three categories of AIF (page 16 of the PDF) - minimum corpus of CDMF Rs 3,088 crore - leverage can be upto 10 times the corpus using guarantee extended by Govt of India - as per proposed regulatory mandate, initial contribution of specified debt-oriented mutual fund schemes may be approximately Rs 2,860 Crore and the one time contribution of AMCs shall be approximately Rs 228 Crore (total Rs 3,088 crore) (page 21) - loss waterfall (page 32) -

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A Brief Outline of Dixon Technologies (India) Ltd

General Market Chatter

Negative Impact of Debt Mutual Fund Tax Changes

Emami Limited Buyback Offer 2023

When Is The Next Buyback Offer Likely To Be?

Ajanta Pharma Buyback Offer 2023

Natco Pharma Buyback Offer 2023

When Will US Federal Reserve Stop Hiking Interest Rates?

Why Do Indian Equity Mutual Funds Always Disappoint Investors?

Adani Stocks Meltdown and Nifty Next 50 Index

Are Indian Stocks Immune to Adani stock Meltdown?

Meltdown in Adani group Listed Stocks

Why the Divergence Between Sensex and Nifty 50 in Today's Trade?

Indian Stock Market Moves Fully to T+1 Settlement

India Up the Ladder in MSCI EM Index

New Rules on Ex-date and Record date

Crisil Report - Big Shift in Financialisation

Weblinks and Investing

-------------------

Disclosure: I've vested interested in Indian stocks and other investments. It's safe to assume I've interest in the financial instruments / products discussed, if any.

CFA Charter credentials - CFA Member Profile

CFA Badge

He blogs at: