MFs Told to Cut No. of Funds Un­der Mgmt

Reg­u­la­tor wants cos to stick to only one fund per cat­e­gory to end com­plex­i­ties of in­vest­ing

The Economic Times - - Front Page -

Saikat Das & Reena Zachariah

Mum­bai: The Se­cu­ri­ties & Ex­change Board of In­dia has told mu­tual funds to dras­ti­cally re­duce the num­ber of funds un­der man­age­ment and stick to only one fund per cat­e­gory in an at­tempt to end the com­plex­i­ties of mu­tual fund in­vest­ing. The reg­u­la­tor be­lieves that the cur­rent prod­ucts list, longer than the num­ber of ac­tively traded listed stocks on stock ex­changes, is con­fus­ing in­vestors. A plethora of schemes makes it im­pos­si­ble for an in­vestor to gauge a fund’s suit­abil­ity and of­ten the dis­tinc­tions are too thin to make any sig­nif­i­cant dif­fer­ence, Sebi feels. The num­ber of schemes un­der the debt cat­e­gory has to be brought down to 8 and 7 for eq­ui­ties, the reg­u­la­tor told in­dus­try rep­re­sen­ta­tives ear­lier this week, four peo­ple familiar with the dis­cus­sions said.

Sebi has stopped giv­ing nods un­less the prod­uct is dis­tinct

Debt

Eq­uity

Oth­ers

The reg­u­la­tor wants ev­ery fund to have one scheme un­der each cat­e­gory. This could in­clude liq­uid, liq­uid plus, ul­tra short-term, short term, in­come, gilt, monthly in­come plan, and credit fund for in­vestors in fixed in­come plans. For eq­uity, the def­i­ni­tion should be large cap, mid cap, mi­cro cap, ELSS, bal­ance fund, ar­bi­trage fund, con­cen­trated fund. “Words have been spo­ken many times, but mu­tual funds have not taken any proac­tive steps so far to merge sim­i­lar schemes,” said a Sebi of­fi­cial who did not want to be iden­ti­fied. “Sebi has stopped giv­ing ap­provals to new schemes un­less fund houses are able to show that their new prod­uct has some dis­tinc­tive fea­ture.”

The mu­tual fund in­dus­try in its ea­ger­ness to raise the as­sets un­der man­age­ment played on the psy­chol­ogy of in­vestors with new scheme at reg­u­lar in­ter­vals as they tend to be­lieve that buy­ing a unit at Rs 10 is ben­e­fi­cial com­pared to an ex­ist­ing fund whose net as­set value could be higher. This led to a surge in as­sets but the sheer num­ber of schemes made life dif­fi­cult for in­vestors. There are about 1,605 debt schemes while the to­tal num­ber of schemes, in­clud­ing eq­ui­ties, are at a whop­ping 2,599, data from Value Re­search, an in­dus­try tracker, shows. ICICI Pru­den­tial tops the list with 376 schemes, fol­lowed by Re­liance at 248. For HDFC Mu­tual Fund run by Milind Barve, it is 216.

“It is a prob­lem of plenty,” said Dhirendra Ku­mar, CEO, Value Re­search. “Sebi’s move will re­duce the un­nec­es­sary con­fu­sion cre­ated by the mul­ti­plic­ity of prod­ucts among in­vestors. Go­ing for­ward, this will help in­crease in­vestor par­tic­i­pa­tion in mu­tual funds.” M Damodaran as chair­man of the reg­u­la­tor ini­ti­ated the process a decade ago, but it did not gain mo­men­tum.

“The reg­u­la­tor has given us a for­mat where our fund schemes have to fit, but one scheme per cat­e­gory,” said a fund man­ager who pre­ferred anonymity. “We will again re­vert to Sebi af­ter do­ing due dili­gence.”

More­over, the move should cre­ate a level-play­ing ground be­tween old and new fund houses.

To­tal Num­ber Of Schemes (All In­clu­sive)

To­tal Num­ber Of Schemes

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