If a fund house is interested in just a targeted audience like HNIs or corporates they can create a PMS or Alternative investments Fund, no need to participate in the MF industry, said SEBI chairman UK Sinha
For the first time market regulator Securities and Exchange Board of India (SEBI) admitted there are non-serious players in the mutual fund (MF) industry. “The top 10 
asset management companies (AMCs) manage around 77% whereas the bottom 10 players account for just 1% of the industry’s assets under management (AUM). This just shows that there are several AMCs which are not serious about their business. There is a strong need for improvement,” UK Sinha, chairman of SEBI, pointed out.
He was speaking at “National Mutual Fund Summit 2013” organised by the Confederation of the Indian Industry (CII) in Mumbai.
Mr Sinha said, “There is a need for a new (mutual fund policy) one. The (new) policy should dis-incentivise non-serious players. The bar should be raised for new players in the industry. AMCs would need a capital requirement. Many would say why more capital is required. AMCs manage funds so there is no need for capital. However, if a fund house is serious they would use the capital to invest in growth of the business. If a fund house is interested in just a targeted audience like HNIs or corporates they can create a PMS or Alternative investments Fund, no need to participate in the MF industry.”
The SEBI chief also mentioned that it has set up a committee to analyze the performance of AMCs and it would be submitting the report in next two-three months. Based on the report, SEBI would decide on what steps to take, he said.
SEBI had mandated that AMCs on a regular basis mention steps they are taking to increase mutual fund penetration. “Over the past few months, just 52 branches have been set up by fund companies. AMCs have a total of around 1,600 branches. Compare this to insurance sector, where a big insurance company set up around 300 branches in a single day,” he said.
Direct schemes seemed to have a positive impact, claimed Mr Sinha. From share of 12% AUM in December 2012, it has increased to 28% in May 2013. Of this direct equity share has gone up from 7% to 8% and direct debt has increased from 31% to 45% over the same period.
On the lack of penetration of mutual funds, HN Sinor, chief executive of the Association of Mutual Funds in India (AMFI) mentioned that the total number of folios in postal savings schemes is much more than that of the total folios of the MF industry.
The SEBI chairman mentioned that there would be a single SRO (self-regulatory organisation) for mutual funds. The cut-off date for receiving applications for SROs would be 31 July 2013. The AMFI chief mentioned that it is in the process of completing the formalities for setting up the SRO. The new organisation would be known as Institute of Mutual Funds in India.
A Balasubramanian Chairman-CII Mutual Fund Summit 2013 and CEO BSL AMC, mentioned that retail folios in the debt segment increased by 13% whereas in the equity segment retail folios declined by an equivalent number of 13%.
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Instead of making all mutual funds become the same generic funds for all sections of investors, SEBI should actively promote differentiation. Mutual funds targeted at specific needs or types of investors are a good thing.
SEBI can certainly consider imposing conditions like minimum capital, minimum number of investors etc. and strict transparency rules. If it is matter of costs of monitoring too many small funds, SEBI can charge a fee from fund schemes that are below the recommended number of investors or AUM.
But, it should allow different kinds of funds to flourish.
ramanathan dwarakanathan
http://ddramanathan.blogspot.in/
sathya cumaran
MF has to be sold like insurance. What has been done is brokers targeted HNIs and restricted selling to metros and Tier-I cities. There is need to penetrate in semi-urban and rural areas. That will require huge effort and the industry is not willing to do that.
All schemes and funds who have meager corpus must be closed immediately. Also consolidation of schemes must be ruthlessly enforced.
Why are AMCs reluctant to commit more capital?