Small and mid-sized mutual fund houses have raised questions at the functioning of their industry body - Association of Mutual Funds in India (Amfi). They allege is decision making process is tilted towards the sector’s top players, which they termed “irrational and dangerous”.
Though the smaller players have been unhappy with Amfi for quite some time, the latest trigger for their angst is the industry body’s plan to stop payment of upfront commissions to distributors selling equity products. During interactions with Business Standard, more than half a dozen industry chief executives even went to the extent of saying that if the impact of big players continues unabated, they would prefer to move out from Amfi and form a parallel body.
They admit that under H N Sinor, chief executive officer (CEO), there have been improvements but add they continue to feel neglected as their concerns are not heard.
“Our viewpoint on banning upfront commissions on equity schemes is not being considered. Our bigger peers always tend to control decisions at the Amfi board,” says the CEO of a small fund house, who did not wish to be named.
At the moment, there is no formal talk on getting out of Amfi. “But, yes, we have a general consensus on the issue,” says another CEO. He further explains that fund houses pay membership fees Rs 1-10 lakh per annum, depending on the asset size of the players. “But, what for?” asks an executive. “Amfi, as an industry body, has proved ineffective in raising the industry’s concerns with the regulator and the government.”
Smaller fund houses argue for established players with high brand value, it will be easier to do away with upfront commissions. “But for us, it will only add further pressure. We are struggling to carry on our business amid tightening regulatory measures. The top players increased in size at a time when regulatory controls were not so stringent. There should be a level playing field,” says the CEO cited earlier.
When contacted, H N Sinor termed these ‘rumours’ and preferred not to comment on the issue. But added, “Amfi is a Section 25 company, run by a board of directors, comprising 15 members, elected from the largest to the smallest fund houses, giving proportional representation to all.” Two years back Amfi had less than 10 members on its board. Following suggestions from small fund houses, the number of members were increased, thereby giving participation to the smaller players, too.
Amfi, the apex body of all the registered asset management companies (AMCs), was incorporated in August 1995, as a non-profit organisation. As of now, all the 44 AMCs registered with the Securities and Exchange Board of India, are its members.
Milind Barve, CEO of HDFC Mutual Fund - the largest fund house, is the chairman of the board, while Sundeep Sikka, CEO of Reliance Mutual Fund holds the position of vice chairman.