google.com, pub-6370463716499017, DIRECT, f08c47fec0942fa0 AlfaBloggers Best Bloggers Team Of Asia : In USA too Funds Leap Beyond Their Benchmarks

Thursday 20 September 2012

In USA too Funds Leap Beyond Their Benchmarks


Beware! How  Bank systematically cheats 

SIP Systematic Investment Plan (SIP) or 

SIP Systematic Cheating Plan 

Systema...hdfc sip, sbi sip, sip calculator, sip investment, sip mutual fund, sip phone, structural insulated panels, voip


Who Makes Money ?

MF
Banker
Broker

Who suffer

Poor Investor

A special SIP series for members who want to do SIP on an Agents calls.  Systematic Investment Plan is  not a 100% systematic is what I am going to talk .... Hope you understand what I mean, because there are a number of Bankers who cheat people. As they have big tragets.


In USA too Funds Leap Beyond Their Benchmarks

In a world of shrinking bond yields, many mutual funds have found a way to make themselves look better.

Their secret: Invest in riskier bonds but continue to measure their performance against benchmarks composed of safer investments.

At least 187 bond funds, including those run by big asset managers such as Allianz SE's ALV.XE -0.78% Pacific Investment Management Co., Oppenheimer Funds Inc. and Putnam Investments, are handily beating the benchmarks against which they compare themselves, according to an analysis by investment-research firm Morningstar Inc. MORN +0.52% for The Wall Street Journal.

Many of them have done so by investing in high-yield corporate bonds, mortgage-backed securities and emerging-market debt, among other securities, according to Morningstar.

Of course, all active fund managers try to beat the benchmark. But concerns can arise when fund managers invest in bonds or other instruments in a proportion that is far off the benchmark. That makes it all the more important, experts say, for investors to keep tabs on their funds' holdings.


Jon Krause
Funds that stretch for higher yields could be at risk of steep losses if the market turns. In 2008, about 40 funds that held large positions in mortgage-backed securities and derivatives outside their benchmarks lost 10% or more, according to Morningstar.

"If they had been more closely tracking the index, a lot of those losses wouldn't have happened," said Eric Jacobson, Morningstar's director of fixed-income fund research.

Benchmarks are the main tool investors use to measure mutual funds' performance. But bond funds are free to choose—and change—their benchmarks.

The Securities and Exchange Commission requires funds to include in their annual reports a chart comparing their performance over a 10-year period with that of an "appropriate broad-based" securities benchmark. But there are no specific requirements, said SEC spokesman John Nester.


Bond mutual funds have boosted their performance this year, in part by deviating from the benchmark indexes they are supposed to resemble. Click on column headers to sort.


Fund prospectuses typically warn investors that managers reserve the right to invest outside their benchmarks as conditions warrant. At the same time, in marketing materials, funds often compare themselves against their benchmark as evidence of strong performance.

Lately, bond funds have been straying more than usual. The "tracking error," the term Morningstar uses for the amount that bond funds veer from their benchmarks, has averaged 2.20% for the 12 months through Aug. 31. (A reading of zero signifies perfect alignment with the benchmark.) The gap was 1.95% during the same period in 2011, according to Morningstar.

In the five years before the financial crisis, the deviation averaged 1.37%.

On average, bond funds beat their benchmarks in the year ended Aug. 31 by about 1 percentage point, according to Morningstar. During the corresponding period in 2011, they trailed their benchmarks by an average of half a point.

To be sure, other factors besides deviation from the benchmark can affect fund performance, such as the timing of bond purchases and sales. And not all funds that stray are rewarded for their daring: 102 of the funds Morningstar flagged had returns that lagged behind or matched their benchmark.

Still, many funds are holding much riskier bonds than their benchmark indexes would suggest—and for the moment are being rewarded.

Putnam Investments' Diversified Income Trust fund, with $3.4 billion in assets under management, has returned 9.4% in 2012, easily beating its benchmark, the Barclays U.S. Aggregate Bond Index, which has returned 3.5%, according to Morningstar.

Almost three quarters of the Barclays index is devoted to low-yielding U.S. Treasurys and securities issued or backed by U.S. government agencies. The Putnam fund doesn't hold any of those types of bonds.

Instead, the fund has 30% of its holdings in high-yield corporate bonds, 17% in emerging-market bonds from countries like Russia and Venezuela, and 16% in non-agency mortgage-backed securities.

Bill Kohli, co-head of fixed income at Putnam and manager of Putnam Diversified Income Trust fund, said the fund makes it clear in its marketing material that it invests in a "range of investment opportunities" including emerging-market debt, high-yield bonds and mortgage-backed securities.

Oppenheimer Global Strategic Income Fund, with $8.7 billion in assets, has seen its tracking error jump from 6.9% to 7.5% in the past year, according to Morningstar. It holds no U.S. Treasurys, and has 30% invested in high-yield bonds and 32% invested in emerging-market debt, according to the company.

The fund has beaten its benchmark, the Barclays U.S. Aggregate Bond Index, by about 7 percentage points this year.


Art Steinmetz, Oppenheimer's chief investment officer, said other indexes might be a more appropriate performance gauge at the moment. But he said the fund frequently changes its holdings, as allowed in its investment mandate, and that it wouldn't make sense to change its benchmark often.

Pimco Total Return, the world's largest bond fund with $273 billion in assets under management, also used the Barclays index as its benchmark. Its tracking error rose to 3.62% at the end of August, compared with 2.75% last year and 1.55% in 2010, according to Morningstar.

Pimco co-chief investment officer and founder Bill Gross has slashed the fund's holdings in U.S. Treasurys to 21% of the portfolio in August, compared with 33% at the end of July. Half of the portfolio is held in a mix of non-agency and agency mortgages. The fund has returned 8.7% so far this year. Pimco declined to comment.

Jacob Wolkowitz, an investment manager at Minnesota-based Accredited Investors, which has about $1 billion in assets under management, said he recently shopped for new bond funds to invest client money.

In each call with fund managers, he said, he brought up the issue of their benchmark. Mr. Wolkowitz said six or seven years ago, bond fund benchmarks better reflected a fund's investments.



Reliance Mutual Fund - Reliance Fixed Horizon Fund XX S12 Dividend PO ...

Moneycontrol.com
Reliance Mutual Fund - Reliance Fixed Horizon Fund XX S12 Dividend PO - Record Date. Reliance Capital Asset Management Limited has informed the Exchange that the record date has been fixed on September 26, 2012 for the purpose of maturity and ...
See all stories on this topic »
ICICI Prudential Mutual Fund fixed-income head Chaitanya Pande quits
Economic Times
ICICI Pru Mutual Fund, which manages over Rs 73,000 crore and is ranked the third-largest fund house in the country, is learnt to have appointed Rahul Goswami fixed-income head. Goswami, who earlier had a stint with ICICI Pru, has over 17 years of fund ...
See all stories on this topic »
3 investments to endure 3 more years of low rates
The Associated Press
Money-market mutual funds are likely to continue paying barely above zero, with 10-year U.S. Treasurys yielding less than 2 percent. That's the outlook after the Federal Reserve's latest move to stimulate the economy by prodding Americans to spend and ...
See all stories on this topic »

Mutual funds join hands with PSU banks for rural reach
Hindu Business Line
With the SEBI regulations emphasising on higher participation from rural areas, mutual fund houses are further strengthening bank partnerships. In the last one month period, fund houses have been tying up with banks in a bid to increase their rural reach.
See all stories on this topic »
Money fund assets fell $10.33 billion to $2.568 trillion in latest week
Washington Post
Assets of the nation's retail money market mutual funds rose $1.88 billion to $888.73 billion, the Washington-based mutual fund trade group said. Assets of taxable money market funds in the retail category rose $2.2 billion to $700.1 billion. Tax ...
See all stories on this topic »
Know the restrictions on cash investment in mutual funds
mydigitalfc.com
There is a specific process that needs to be followed while investing in a mutual fund and one part of this deal is the manner of investing. There is a need to know the types of instruments that can be used for investment and, hence, this becomes an ...
See all stories on this topic »
Top 5 Best Performing Utilities Mutual Funds Year to Date - Best Performing ...
NASDAQ
During difficult economic conditions, the demand for essential services such as utilities remains more or less constant. Since this category of funds protects investments during a downturn, they are viewed as a defensive choice, and have gained ...
See all stories on this topic »
Funds Leap Beyond Their Benchmarks
Wall Street Journal
Bond mutual funds have boosted their performance this year, in part by deviating from the benchmark indexes they are supposed to resemble. Click on column headers to sort. View Interactive. Fund prospectuses typically warn investors that managers ...
See all stories on this topic »

Reliance Mutual Fund buys 1.88 lakh shares of Supreme Infra
Moneycontrol.com
On September 18, 2012 Reliance Mutual Fund bought 188,607 shares of Supreme Infrastructure India at Rs 285. In last trading session the share ended at Rs 295, up Rs 9.95, or 3.49%. It touched an intraday high of Rs 301.35 and an intraday low of Rs 285.
See all stories on this topic »
Govt sets the ball rolling for PSU Exchange Traded Fund
Hindu Business Line
An ETF is just like an equity mutual fund scheme which consists of shares of many companies. It tracks an index and is traded on a stock exchange. Its constituent stocks are listed and actively traded. Since this fund has shares from various sectors ...
See all stories on this topic »

No comments:

Post a Comment

Note: only a member of this blog may post a comment.