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AMFI board meets as Sebi prepares long-term MF policy

Press Trust of India  |  New Delhi 

Top honchos of mutual fund industry today discussed various issues affecting the business as also a long-term policy, being finalised by regulator Sebi, which could bring in sweeping changes in the way fund houses operate and are regulated.

The issues discussed at a meeting of industry body AMFI (Association of Mutual Funds in India) also include disclosure about group investments in the schemes of respective mutual funds, sources privy to the discussions said.

The meeting took place a day before regulator Sebi's board is likely to discuss a long-term mutual fund policy.

The policy, among others, may make it stringent for fund houses to set shop including by way of mandating a high minimum networth requirement, and the need for funds to put in own seed capital in their schemes alongwith investors' money.

AMFI officials and members could not be contacted.

The issue of investments by group companies in mutual fund schemes has gained importance after leading player Reliance Mutual Fund recently made a voluntary disclosure of such investments and hoped that others would follow suit.

Religare Invesco MF last night became the second fund house to make such a disclosure. While the group investments of these two fund houses are relatively small (about three per cent for Reliance and about 1 per cent for Religare MF), such investments are 15-20 per cent for some other MFs.

Regulator Sebi has been approached with suggestions to make such disclosures mandatory, while industry experts have also welcomed the disclosure of group investments in their own AMCs (Asset Management Companies).

According to Prithvi Haldea, Managing Director, Prime Database, such kind of disclosure is a very good move as investors are generally guided by rankings and these rankings may change if group investments are excluded from the AUM.

"Besides such disclosures, there should be separate rankings as per investor class and instruments as well which will give small investors a right perspective," Haldea added.

Many large fund houses have significant chunk of investments coming from their group entities, and so the ranking as per average AUM (Assets Under Management) does not show the true strength of a mutual fund.

Echoing similar sentiments, fund tracking firm Value Research Online CEO Dhirendra Kumar said: "It is a very good move and other fund houses should also follow suit."

Investments coming from group entities is not a bad thing but investors should be aware of such developments, which would help in making the system more transparent, Kumar added.

A senior AMFI executive on condition of anonymity said investments of group companies in their own AMCs is not wrong and such disclosures are not likely to have an impact on retail investors as a whole. Moreover, it also shows the confidence of companies in the fund management system.

According to industry estimates, all the fund houses together have investments totalling over Rs one lakh crore in their collective asset base of about Rs nine lakh crore.

First Published: Wed, February 12 2014. 20:39 IST