Rajen Gala

Top Down and Bottom Up style of investing is one of the most common terms used in fund management. Let’s look at an example. Let’s say Tim is a US based businessman wanting to set up a software business. For a software business he would need software engineers. So, instinctively his mind wanders to India which is known have an abundant supply of software engineers. Once he has decided that it is India which shall be the source of supply of software engineers, he then decides to contact an HR consultant in India to line up people. He then interviews the engineers one by one and makes his selections. In this example his decision to select India as the source of software engineers represented the top-down approach while the detailed selection process involving interviews and references etc. represents the bottom-up approach. A top-down approach is an investment strategy that selects various sectors or industries and tries to achieve a balance in an investment portfolio. The top-down approach analyzes the risk by aggregating the impact of internal operational failures. This approach is simple and not data-intensive. The top-down approach relies mainly on historical data. A bottom-up approach, on the other hand, is an investment strategy that depends on the selection of individual stocks. It observes the performance and management of companies and not general economic trends. The bottom-up approach analyzes individual risk in the process by using mathematical models and is thus data-intensive. This method does not rely on historical data. It is a forward-looking approach unlike the top-down model, which is backward-looking. In the event of fund management similarly the fund manager’s decision of investing in emerging markets would represent the Top-Down approach while the detailed selection process of companies based on size, turnover, profitability, management quality etc. would represent the Bottom-Up approach.

Contra fund has its genesis in the popular saying, “when others zig you zag”. It basically takes contrasting positions and consciously does not flow with the tide at all times. Let me explain you through a story. There was a boy Jay travelling with his family. They met with an accident in which he lost all his family members. He became orphaned. His relatives turned away from him. Ram a friend of Jay’s father who knew the family was very fond of Jay. He liked him because he was cultured, well mannered, very studious and always a topper in his class. He knew Jay had the talent to become a very successful person. He therefore without any hesitation took Jay under his shelter. He nurtured and educated him sparing no effort. As expected, Jay grew up into a very smart, intelligent and successful person. When Ram started aging and becoming weak it was Jay who stood by him as his shield. He ensured that Ram had all the comforts that he needed. From a Contra perspective one can say that the bet Ram took on Jay was a contra bet. He backed him at a time when others were avoiding him. He did it because he had a clearer understanding of the intrinsic qualities of the boy. He always knew it would be worth his while to help Jay in the long term. Similarly, a Contra fund manager looks for bad news and searches for opportunities within the bad news. He identifies companies being shunned by investors due to overall mood and picks them into his Contra basket. And as we saw in the case of Jay, such companies also may take some time to bounce back. Therefore, as an investor one needs to have patience when investing in a contra theme. The tale of Jay pictorially is Helpless Jay after the accident & Successful Jay once grown up. A contra Mutual Fund invests against the existing market trends and purchases stocks which are not performing well currently. This was the story of Contra investment. Remember it takes patience for the investment to play out.

What is KYC? KYC Means “Know Your Customer”. To invest in any financial instruments, you are required to first provide a few personal details. Customer identification is a key part of system in place to serve many purposes like it can help restrict money laundering and fight financial crime in a more targeted manner. Today, KYC checks are almost compulsory for all financial dealings. Customer is required to submit all KYC documents before investing in various instruments. All financial institutions are mandated by the RBI to do the KYC process for all customers before giving them the right to carry out any financial transactions. Types of KYC There are two types of KYC verification processes. Both are equally good, and it is simply a matter of convenience whether one chooses to opt for one type over the other. Both are as follows:  Aadhar-based KYC: This verification process is done online, making it highly convenient for those with a broadband or internet connection. Here, the customer needs to upload a scanned copy of their original Aadhar card. If the customer wishes to invest in a mutual fund, with Aadhar based KYC the opportunity to do so is only up to Rs.50,000 a year.  In-Person based KYC: If the customer wishes to invest more in mutual funds per year, they will be required to carry out an in-person verification KYC which is done offline. For offline KYC process, here are the steps to follow, Download the KYC Form Fill in with your details, specifically PAN or Aadhaar Visit the nearest KYC registration agency office (KRA) Submit the form with attached ID and address proof While this process is quite simple, it does require legwork and can take longer too. KYC verification can take up to 7 working days. You can find instructions and guidelines to fill the KYC form and download KYC form from the below link, https://www.camskra.com/CKYC-Individual%20Form.pdf

What is ePayEezz? Investor can register PayEezz electronically through MF Utility (MFU) portal. The investor provides the one-time instruction by electronic mode to their CAN (Common Account Number) registered bank thereby authorising MFU to debit the said bank account for future subscription transactions. What is the difference between the PayEezz and ePayEezz? PayEezz registration is done physically by submitting a physical form while ePayEezz is electronically registered. PayEezz has a maximum limit of Rs. 1 crore while ePayEezz has a maximum limit of Rs. 10 lakhs. ePayEezz is restricted to the banks offered by NPCI, while physical PayEezz can be registered for all the banks. Registration for ePayEezz is 3-4 working days while for physical PayEezz it is 30 days. Are there any charges for registering ePayEezz? MFU does not charge for registration of ePayEezz. However, some Banks may levy charges on the customer for Registration / Transaction. Furthermore, MFU does not charge the investor, whenever they submit any subscription transaction, including Lump Sum, SIP or Schedule Transaction / SPP (Scheduled Purchase Plan) using the registered ePayEezz. What is the benefit of registering for ePayEezz? ePayEezz is a One Time One Place payment mandate from MFU. The investor needs to give the mandate one time, rather than submitting in every fund house where they want to invest. As ePayEezz is registered with MFU, the same mandate can be used to make payments for Lump Sum/SIP/ Schedule Transaction / SPP subscriptions across the industry. Do I need to register ePayEezz separately for each Fund Houses? MFU operates on the principle of Aggregation to offer convenience of transaction execution to the mutual fund investor. The same principle is applied even in the case of ePayEezz. Once an ePayEezz is registered with MFU, then it can be used to make payments for investing across the industry. There would be no need to register separate payment mandates for each Fund House.  Can I use the ePayEezz for making payments for lump sum subscriptions? Yes. Once an ePayEezz is registered against a bank account under the CAN, the investor can use the same, to make payments towards Schedule Transaction / SPP, SIP instalments, and Lump Sum subscriptions. Within how many days will the ePayEezz be registered? The time limit stipulated by National Payments Corporation of India is 72 hours for each of the Bank in NACH system i.e. destination Bank (Customers Banks) and the Sponsor Bank (Transaction /Mandate originating Bank) for processing the mandate. However, the actual turnaround time may vary. What is ePayEezz Reference Number (PRN)? PRN is the unique mandate reference number allotted upon completion of ePayEezz registration. What are the various transactions that I can use ePayEezz for payment? An ePayEezz once registered can be used for making payments against any subscription such as Lump Sum purchase, Schedule Transaction / SPP, SIP, across any fund house on the MFU Portal. On which bank accounts can I register for ePayEezz? An ePayEezz can be registered only on the bank accounts that are registered in the CAN and such CAN registered banks are offered / by NPCI.

What is PayEezz? PayEezz is a facility offered by MF Utility (MFU) through which an investor can register one-time mandate. Investor provides a standing instruction to his banker authorising MFU to debit his account for any future subscription transactions such as SIP or Lumpsum. What is the benefit of registering under PayEezz? By registering under PayEezz, investors need not issue cheque or other payment instructions every time they make an investment through MF Utility up to the amount mentioned in the PayEezz mandate.  This brings ease and convenience in subscribing for mutual fund units through MFU. This will also enable you to transact paperless. PayEezz can be registered by submitting the PayEezz form at the time of CAN (Common Account Number) creation. What are the documents required to register PayEezz? No additional documents are required to register PayEezz, investors should submit a cancelled cheque (or a self-attested photocopy of cheque) with the name and the account number pre-printed on the cheque along with the PayEezz form. If the cheque does not bear the sole/first/primary holder’s name, a copy of the passbook/bank account statement or a letter from the banker has to be submitted which indicates that the sole/first/primary holder is one of the account holders in the account. Are there any charges for registering PayEezz under CAN? There are no charges for registering PayEezz at MFU. However, some banks may charge the customer for registration / transaction at the banks end. How many PayEezz registration can be made under a CAN? Investor can have as many PayEezz registrations as they wish under a CAN. PayEezz can be registered only in a bank account which is registered under a CAN? Within how many days will the PayEezz be registered? Depending upon the investor’s bank mentioned in the PayEezz, it may take anywhere between 10-30 days to get the PayEezz registered. How will the investor/distributor come to know about the successful registration of PayEezz? A communication will be sent from MFU to the investor/distributor via email and/or SMS upon successful registration of the PayEezz informing the PayEezz Reference Number (PRN). What is PRN number? PRN (PayEezz Reference Number) is the unique reference number allotted to each PayEezz registration. The same will be communicated to the investor/distributor upon successful registration of the PayEezz. Can we cancel/modify the PayEezz and what is the process? Investor can submit a PayEezz cancellation / modification request and MFU will do the needful. When can the investor start transacting using the PayEezz facility for payment? Investors can start transacting using the PayEezz immediately after they get a PRN from MFU. What are the various transactions that an investor can use PayEezz for payment? All subscription transactions, both lump sum and SIP are enabled with PayEezz. Is there any amount limit for transacting using the PayEezz? The total transaction amount in a form should not be more than the limit specified in the PayEezz. Do I need to authorize every payment using PayEezz? Yes. Where a transaction is initiated by your distributor / RIA, an authorization is sought for every payment using PayEezz, by way of an email and/or SMS to the email ID and mobile number registered under your CAN. Please ensure both email ID and mobile number are registered under your CAN and kept up to date at all times. Where the transaction is initiated by you by way of signing a transaction form or otherwise, such confirmation is not sought for. Can the distributors / RIAs register PayEezz through their login? The distributors / RIAs will have a facility to register the PayEezz through their logins. The original PayEezz form has to be submitted to the mapped POS branch as usual along with the other documents. The registration process will be initiated only upon receipt of the original PayEezz form by MFU POS.

What is MF Utility? The Association of Mutual Funds in India (AMFI) has started a single-window Platform, which acts as a “Transaction Aggregation Portal” through which a Mutual Fund customer is enabled to transact in multiple schemes across Mutual Funds using a single form/payment. It’s a “Shared Services” initiated by AMFI subsidiary MF Utility India Pvt. Ltd. MF Utility (MFU) is a browser-based application that connects investors to registrars and transfer agent (RTA), banks, fund houses, payment gateway and know your customer (KYC), or KYC registration agencies (KRA). MF Utility (MFU) is operated by MF Utility India Private Limited (MFUI) which is equally owned by participating AMC’s. What is CAN? Common Account Number is an industry level Folio allotted by MF Utility to an Investor. It is the combination comprising of the following, Number of Investors – i.e., 1 or 2 or 3. Order of holding – i.e., No of holders. Mode of holding – i.e., Single, Joint and Anyone or Survivor. Social Tax Status – i.e., Individual, Company, Non-Resident, etc. What are the different transactions enabled through MF Utility? Common Account Number (CAN) registration for Investors. Submission of documents to KRAs for KYC Registration for those investors who are seeking CAN creation. Commercial Transactions like Purchases, Redemptions and Switches. Registration of Systematic Transaction Plan (SIP), Systematic Withdrawal Plan (SWP) and Systematic Transfer Plan (STP). Non-commercial transactions (NCT) like Bank Account changes, facilitating change of address through KRA’s etc. based on duly signed written requests from the investors. What are the features of MF Utility? MF Utility (MFU) provides a whole lot of features to the Mutual Fund customers like:- Provides Common Account Number (CAN) facility to Investors. Provides standardization of forms, processes and MIS across the industry. Provides multiple modes of access and transaction submission options. Provides broad and neutral Points of Service (POS) footprint for enhanced coverage. Enables transactions through a common transaction form. Enables single payment for multiple scheme investments across various Mutual Funds. Provides CAN based consolidated view of investments across the industry. Provides industry level alerts, triggers, reminders etc. Provides a centralized complaint management and tracking system. MF Utility (MFU) is an innovative initiative of the Indian Mutual Fund Industry that brings significant benefits to all stakeholders, i.e., Investors, Distributors, Registered Investment Advisors (RIA’s) and Asset Management Companies, by leveraging technology, MFU has brought many conveniences to the investors and distributors /RIA’s and allowed Mutual Funds to significantly enhance their reach and presence in the country to further the goals of retail penetration. MFU has helped remove duplicities in the system and reduce the inherent risks in the industry.