Skip to main content

Sebi wants MFs to consolidate schemes, limit new fund offers

Fund Houses Also Asked To Refrain From Launching Similar Schemes


   KN Vaidyanathan, an executive director at the Securities and Exchange Board of India (Sebi), in charge of the mutual fund industry regulations, has met top executives of asset management companies individually in the past one week.


   The interactions have been largely intended to push mutual funds to reduce the number of schemes, discourage launch of similar products and provide a common account statement for all investors, said four industry officials privy to the development. None of them were willing to be quoted, because of the sensitivity of the matter.


   "We were told to come with all the relevant documents related to our operations for the regulator to understand the business practices better," said a chief executive of a private mutual fund. "In our discussions, we were advised to trim our product offerings to reduce risks and improve services to investors," he said.


   Sebi chairman CB Bhave, in an industry body forum on mutual funds in June, had asked asset management companies to 'streamline their 3,000-odd product offerings to make them more investor-friendly'.


   "Even if you put before me 3,000 investment products, I won't know how to choose from those products. I'll have no idea of which scheme is good for me," Mr Bhave said then, lashing out at the practices of the industry. "If you really want to reach to the so-called small investors in whose name you do everything, does he need 3,000 options? Is there really so much of innovation that is going on? Are these schemes really so different from each other or were there incentives operating in the market that made us generate these 3,000 options?" the Sebi chief said.


   Vaidyanathan, whose tenure with the securities market regulator, has drawn sharp criticism from the mutual fund industry, also asked fund officials to refrain from launching schemes almost similar to the ones they have and focus more on the flagship products, said one of the four industry officials quoted above.


   "The message from Sebi is very clear; don't come to us for permission to launch products similar to the previous ones, though it was not put across in as many words," the official said. "Also, we have been told if your fund is coming with a differentiated product, different people should run it," said one official, who attended the meeting.


   In an interview to ET in October, Vaidyanathan had said the regulator was restraining mutual funds from launching new fund offerings at random.. Mutual funds were misusing the new fund offer option to pay higher commissions and also because some investors continue to believe that by getting units at par they are getting them cheap, he said. The regulator has also directed mutual funds to speed up the implementation of consolidated statement of accounts, where investors can view all their investments across schemes at a time, another mutual fund industry said. Currently, MFs dispatch separate account statements to clients.


   Vaidyanathan is learnt to have reiterated the regulator's advice to mutual funds to invest more in investor education. A recent initiative by the Amfi, where every AMC is required to conduct at least five investor camps across cities every month to promote mutual fund products to new investors, is yet to find favour among all members. Mutual funds consider this activity wasteful as distributors are not willing to push equity products after the regulator in August 2009 banned funds from charging investors an initial fee, known as entry load, to remunerate distributors.

 

Popular posts from this blog

What are the factors affect the changes in Interest Rate of Fixed Deposits?

  What are the factors affect the changes in rate of Fixed Deposits? Fixed Deposits are now considered to be a very old fashioned method of saving, but still attract many investors since they have guaranteed returns at the end of the tenure of the investment at a decent interest rate. There are various factors that affect the rates of interest for a Fixed Deposit. Policies of the Reserve Bank of India   - The several norms and restrictions posed by the Reserve Bank of India , in order to gain optimum control over credit and inflow and outflow of fund throughout the country. The repo rate changes, cash reserve ration tends to change and these changes affect the banking products like Fixed Deposits, loans etc. Recession   - When unemployment in a country crosses the benchmark set Recession hits, and slowly the country faces an economic slow movement, affecting the purchasing power of the people in the country, forcing the Reserve Bank of India to release more funds in the financial marke...

Capital Protection Oriented Funds

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Capital Protection Oriented Funds   Erosion of capital is one of the key concerns for investors wanting to invest in equity mutual funds. To address this concern, asset management companies have launched Capital Protection Oriented Funds (CPOFs). What are CPOFs? CPOFs are generally three to five-year, closed-ended funds where 70-80% of the portfolio is invested in fixed income securities, which mature on or before the scheme's tenure. The investment in fixed income securities grows to 100% at the end of the tenure, providing the investor with capital protection. The remaining portion (20-30%) is used to take exposure to equity, which provides the upside. Exposure to equities is either by directly buying equity stocks (plain vanilla CPOFs) or by b...

Understanding Your Cibil Credit Information Report

   WE ARE all familiar with the anxiety and uncertainty that we feel when applying for a loan. After all, it's the lender who decides whether we can own our dream home, our first car, or whether our children can pursue higher education. In a nutshell, a better life depends on the lender's decisions.    While other factors do play a part in the lender's decision, the Cibil Credit Information Report ( CIR ) plays a crucial role in a lender's decision to approve a loan application.    Previously, lenders would treat all loan seekers equally. Each applicant, if approved by the lender's internal credit policy, would be charged at the same interest rate for a particular loan size and purpose. The lenders would charge a higher interest rate to all the borrowers, in order to compensate for the possible default of a small portion of the loan disbursed. In other words, it's like a professor (the lender) punishing an entire class (borrowers) for the mischief played b...

Good Loan

Why Is It A Good Loan?: Loans against gold are cheaper and better than personal loans as the former are available at lower interest rates. In contrast, the interest rates on personal loans are not standardised and can vary from bank to bank. Also, a personal loan depends on a host of factors including, the borrower's salary, profession and the purpose for which the loan is being taken.      For instance, the interest rate on a personal loan of 5 lakh falls in a wide range of 15-30%. But loans against gold are available for as low as 11%. Secured borrowing such as a loan against gold, investments or property is cheaper because it is backed by some assets, which command a good value at any point of time. If the borrower defaults on the loan, the banks can liquidate the assets to settle the loan account.    Being a secured loan, the risk of default and credit losses is significantly lower in this loan compared to other forms of loan for personal use. Given the lower risk, gold loa...

Mutual Fund Review: ING Dividend Yield

  ING Dividend Yield's small assets enable the fund manager to churn in impressive returns… Strategy The aim of the fund is to invest in stocks which offer a high dividend yield. This fund deploys a value based strategy which aims to gain from investing in fundamentally strong and free cash flow generating businesses. The scheme focuses not only on growth but also on the cash generated by the business, which mostly leads to stable returns even in volatile markets. This fund has a low volatility because of its investment in high yielding stocks. The scheme tries to include stocks that yield dividend above the dividend yield of the Nifty and stocks with liquidity, which throws up a universe of 150 stocks.   Our View Launched in October 2005, this fund invests at least 65 per cent of its assets in high dividend yield stocks. The fund has consistently maintained a mix of stocks across varying market capitalisation, with a higher tilt to mid caps compared to small caps. Howev...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now