Where are rich investors investing their money?

Some interesting findings for the year - Where are the richest of the rich affluent investors putting their money and where they plan to put it in the coming year?

A research study conducted by The Phoenix Companies has come out with interesting results. As per the study, the affluent or rich investors invest significantly in both mutual funds and alternative investments, and half of them plan to change their investment allocations in the next year.

The detailed results of the entire study in detail is available at the following PDF file: (https://www.phoenixwm.phl.com/servlet/DocDelivery?DocId=docu_publ_advi_insight_0108.pdf&DocType=0)

Below, I aim to present the summary of the research study:

The research focused on 2 areas:
• Investments in mutual funds and
• Investments in alternative investments.
Alternative investments are defined as investments other than stocks, bonds or mutual funds, including real estate other than buying a second home.

In fact, 81% of respondents responded by mentioning that they have at least one mutual fund in their investment portfolio outside of a retirement plan like IRA, 401(k), 403(b), or other retirement plan and 74% of the respondents hold some or the other alternate investment.

Among the alternative investments, real estate (constituting around 45%) is the most widely held alternative investment, followed by exchange-traded funds (ETFs) (constituting around 30%), hedge funds/hedge fund of funds (constituting around 25%), and private equity funds (just over 20%).

This may come as good news to the Mutual Fund holders. Typically, I am NOT a person who would recommend investing in Mutual Funds because of the costs and fund management charges. But the 81% among the richest of riches having an investment in Mutual funds shows that they trust their mutual fund managers. Now I don’t know if the affluent investors get some rebate in terms of fund management charges or not.

Related: Should you trust your Mutual Fund Manager?

However, I am a biggest supporter of ETF’s or Exchange Traded Funds, and I am happy to see that 30% of the rich respondents trust that investment.

Related: Simplest Investment Strategy & An example of ETF or Exchange Traded Fund

That was about the past. What about the future? For 2008, the study reveals that affluent investors have no common plan when it comes to investment in these turbulent times.

49% of mutual funds owners and 52% of alternative investment owners said they will continue to invest the same amount or more in the coming year, while 51% of mutual fund owners and 48% of alternative investment owners expect to be bearish and invest less in the coming year. This shows a clear flipping and uncertain position.

So effectively, the investor mood is really really low when it comes to investor confidence in the economy. Call it the US recession fear, or the shaking up of global financial markets, the uncertainty that looms over the global markets is also reflected in the rich investors mood.

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Mutual Fund Performance: Debt v/s Equity

How have the mutual funds performed over the recent past? A study by Crisil Fund Services reveals some details. I usually do not recommend anything based upon the past results, as past performance of the mutual funds are no guarantee that the same will be carried on in the future. But its nice to see and learn about how the performance has been and observe what all is possible –which may be contrary to our assumptions.

Not surprisingly it was the Debt-oriented mutual funds that have continued to give positive returns in February, while almost all the stock or equity based schemes have given negative returns negative, as per the study conducted by Crisil Fund Services.

Crisil is a rating and performance monitoring agency and is in the business of providing fund valuations and assigning ratings to different bonds, companies and mutual funds and also provide risk management solutions to the Indian MF industry.

As per the news about the study , the highest monthly returns came from the liquid fund index, Crisil-LX, which was up by 0.66 per cent. This was followed by the Crisil STBEX, the debt index serving as benchmark for short-term bond funds and Crisil Fund-dX, the long-term bond funds index .
These returned 0.30 per cent and 0.28 per cent, respectively. Negative returns in this segment came only from the Crisil MF-Gilt index, the gilt funds index, which ended slightly lower at (0.02 per cent), a Crisil release said.

Meanwhile, all indices with equity components ended in negative over the month. The Crisil Fund-eX, the index for diversified equity funds, declined by 4.34 per cent, Crisil Fund-bX, the index for balanced funds, dropped 3.36 per cent.
Crisil MIPEX, the index used as a benchmark for monthly income plans, was down marginally by 0.13 per cent, it added.

However, even with negative returns in February 2008, it was the Reliance Mutual Fund which maintained the top spot. ICICI Prudential Mutual Fund retained the second spot and UTI Mutual Fund was at third place.

Always believing that more risky stocks will definitely give much better returns is a costly and highly vague assumption.

Markets work randomly – no one can be certain about what may happen tomorrow. Invest your money wisely and in the right instruments, and give it time to grow instead of playing around in short term trading.

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Oberoi Constructions IPO Review (First-sight Review)

One after the other the IPOs are flooding the markets –atleast on the proposal as filed to SEBI.

In the past 2 years, Infrastructure has been the hottest sector in terms of returns. That is the reason why we have seen so many New NFO for Infrastructure Mutual Funds. The data revealed in the advertisements of Mirae Asset Mutual Fund also tells the same story.

Now is the turn of the multi-billionaire Vivek Oberoi or commonly known as Vikky Oberoi led property developer Oberoi Constructions, to come out with a mega IPO.
As per the news, the plans are to launch the Oberoi Constructions IPO so as to raise around Rs 4,000 crore ($1 billion) through this IPO.

Morgan Stanley has been assigned the task to make a fair valuation of the Oberoi Constructions company. The money raised from the IPO will be used towards for acquiring land and fund upcoming new projects – a list which includes the Oberoi Garden City and four and five-star hotels all spread across the length and breadth of the country.

The company is really rich in terms of the assets it currently owns –that too in the prime location – it has a land bank of 130 acres mainly in the suburbs of Mumbai on the western sides. It has eight residential, commercial and retail projects under construction with a development potential of 21 million sq feet.

Though the stock markets are witnessing turbulent times and many IPO’s have been cancelled or delayed. But Vivek Oberoi is confident - “Stock markets will distinguish between the performers and non-performers. We are confident of a good issue,’’.

The company is building Oberoi Garden City, an 80 acre composite realty project including office complexes, malls, schools and residential townships with expected revenues of Rs 8,000 crore. The company has plans to build such projects in all the major cities including Chennai, Bangalore and Hyderabad among others. These projects will be spread over 80-100 acres. Based on land prices in different cities, these projects have a land acquisition cost of Rs 400 crore to Rs 500 crore and a construction cost of nearly Rs 2,000 crore. So the IPO of 4000 Crores will see 2000 Crores being devoted towards this land acquisition. Four hotels are planned in Mumbai and Pune. It is also scouting for properties wherever the company is building Garden City projects. The company is also looking at other infrastructure projects provided those projects have some mix of real estate elements.

The good thing about infrastructure projects is that they have some kind of “Real Worth” in terms of land and building, instead of the projected businesses like “Zero Watt Reliance Power IPO”.

The IPO is expected by the year-end. It’s a long time and hopefully markets will see some better situations by that time as compared to the current volatile situations. Wait for some more information about price band and size of Oberoi Constructions IPO.

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CyDex Pharmaceuticals IPO

More and more IPOs are coming in the markets.
Visa IPO (read review of VISA IPO) is underway, along with Pogo Jet IPO (read review of Pogo Jet IPO). Yesterday, online advertising firm Eyeblaster applied for and IPO.

Today, the US Drug manufacturing company CyDex Pharmaceuticals Inc. has filed an application with SEC or Securities and Exchange Commission. CyDex plans an initial public offering shares through this IPO.

Based in Kansas the drug company has not yet revealed any details about the price band of the CyDex IPO, nor was there any information about the expected size of the CyDex IPO. However, if we consider the registration fees paid to the SEC for IPO, the offering price may sum up to $50 million. CyDex mentioned the total offering price was estimated solely to calculate its registration fee and may change.
CyDex has a nice collection of 12 different products, which use a drug formulation technology based on its patented Captisol cyclodextrins. Captisol cyclodextrins are designed to improve solubility, stability, bioavailability, safety and dosing of a number of active pharmaceutical ingredients.
CyDex has outlicensed its Captisol technology to a number of companies and has more than 30 agreements in place. The company currently receives royalties from Pfizer Inc. on its sales of Geodon IM, a treatment for bipolar disorder and schizophrenia; antifungal product Vfend IV; and Cerenia, which prevents motion sickness in dogs. It also receives revenue from Bristol-Myers Squibb Co. for Abilify Injection IM, which also treats bipolar disorder and schizophrenia.
As per the financial results of CyDex for 2007, it managed to earn $3.8 million in royalty revenue from outlicensees.

Related: Should you apply for an IPO?

CyDex plans to use the proceeds from the IPO to support clinical trials and further product development, to build its internal infrastructure and capabilities, and for working capital and other general corporate purposes.
However, it was a loss making year for CyDex in 2007.

CyDex posted a loss after paying preferred dividends of $7.1 million, versus a loss of $2.1 million in 2006. The company's revenue grew to $12.7 million, from $11.6 million in the previous year. CyDex plans to list its shares on the Nasdaq Stock Market with the symbol "CYDX."

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Consulting Firms hot favourite at IIM

Another piece of news from the IIM’s. It’s the placement season at IIMs and firms are on hiring spree.
The students are making a fortune with the high level of salaries they are being offered. Here is the story about top paid IIM graduates & its underlying worth.

Now, this news is not about the highest paid salary. It’s about the trend that is going on.

This year, it seems that consultancy firms are the hot favourite of the students at IIMs. Till last year it was the investment banks which picked up not only IIM graduates, but even went to IITs to pick up B.Tech students. The trend has changed this year, and it is the consultancy firms like McKinsey, Boston Consulting, AT Kearney and Bain which are the hot favourite for the placements.

Now, Economic Times report this as follows – “It’s a win-win situation for both parties. For students, the attraction lies in significantly higher salaries as well as exciting roles offered both in India and abroad. The firms, on their part, stand to gain by getting to choose from a bigger pool of talent, which under normal circumstances, might have gone to i-banks.”.

This is something I cannot understand. How can it be a win-win situation? Are the graduates making a compromise? What were these consultancy firms doing last year when most of the top ranked students took up jobs at investment banking firms? How many of these graduates really really like to work at a consultancy firm? If Consultancy firms have won this year, weren’t they a looser last year? Will they be able to keep up the winning spree in next coming years?

Hundreds of such questions come up. Ultimately, it all boils down to one thing – randomness. Today, the investment banking and financial sector is witnessing a crisis period, so they are out. Till last year, they were the favorites. Hundreds of IIM aspirants may be having the dream of working in investment banking and that’s what may have taken them to IIM. But how many of those individuals are able to realize the dream today? No body knows. Figures and statistics for such data is difficult to get.

Things work RANDOMLY. You never know what you will get even in next month. Compromise & adjustments are to made at every stage in life, no guarantee of anything anytime.

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UTI AMC IPO

One of the biggest asset management companies (AMC) of India, UTI AMC, which was planning to come out with an IPO has fallen victim to the market pressure.
The UTI AMC IPO which was set to hit the market this month, i.e. in March 2008, has been delayed till further notice.

UTI AMC is India’s third largest AMC and manages assets almost amounting to 53,00,000 crore Rs.

It mentioned that it is delaying the IPO due to “inappropriate” valuation of the UTI AMC before the IPO deal. Actual reason may be the turbulent market timings.

The plan was to offer around 5% of the shares to the public through the IPO process. While the financial investors had come up with a figure close to 8% of the asset under management for the AMC, the company still thinks that the valuations are not upto the expectations.

This would have been the firs ever IPO by an Indian Mutual fund company. Now, the AMC is looking at a possible date next month for the IPO, whose size was pegged at Rs 1,800-2,400 crore, the source said.

Related: Should you apply for an IPO?

Turbulence in the secondary market, which has seen the Sensex dipping by 24 per cent since its January peak, as also Emaar MGF and Wockhardt Hospitals withdrawing their IPOs due to weak investor response, is primarily responsible for the UTI mutual fund’s decision to delay its offer.

The latest development in the mutual fund industry was a big news last week when the Standard Chartered Mutual Fund was sold to IDFC.

While in December, Reliance Capital’s 5 per cent shares were sold to Eton Park hedge fund.

That deal valued Reliance Capital AMC at 13 per cent of its assets managed at that time. Hence the UTI AMC may be looking at that kind of valuations, in the range of 13-14% instead of the currently quoted 7-8%. Let’s see when this IPO finally makes to the markets. Only then one can look at the price bands and valuations of the IPO.

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Eyeblaster IPO for NASDAQ Listing

It is learnt that the New York based online advertising company, Eyeblaster Inc. has filed an IPO application to SEC or Securities and Exchange Commission.
It is estimated that the Eyeblaster company is expected to collect money in the range of $115 million through the IPO or initial public offering. The application was made on Monday.

As of now, there is no information about the price range or price band in which the IPO will be offered. Though a figure of $115 million has been quoted, but the total offering price was estimated solely to calculate its registration fee and may change at a later stage. Lehman Brothers and Deutsche Bank have been appointed as the Book running lead managers for the IPO book building process.

The primary purpose of the IPO is to use the proceedings for “general corporate purposes, including working capital and capital expenditures”. It is also learnt that the Eyeblaster company may use a portion of the money collected through IPO to acquire or invest in companies or technologies which ultimately add synergy to the business of Eyeblaster Inc.
The company will list on the Nasdaq Stock Exchange with the symbol 'EYEB.'

Related: Review of Visa IPO, Review of Pogo Jet IPO & Should you apply for an IPO

It will be interesting to learn see how the IPO is received by the investors. Already, the sector of online advertising is hot with Microsoft making an offer to buy Yahoo and recently Google attempting to purchase DoubleClick.net. Eyeblaster is in the business of online advertising in various streams - campaigns across digital media channels, including online, mobile and in-game, and a variety of formats, including rich media, in-stream video, display and search.

As per the figures and news, In 2007, Eyeblaster's profit rose to $7.4 million from $3.7 million. At the same time, the company's revenue jumped 62 percent to $44.7 million from $27.7 million. Eyeblaster's customer base totaled 979 in 2007.

You never know that one fine day the Eyeblaster company may become a potential target for acquisition by the other big fishes of the pond. That will be the time when the investors and shareholders of this company will benefit substantially.

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