Uti Chief Opposes Plan For Holding Company

The restructured holding company model for the Unit Trust of India (UTI) would turn out to be an expensive proposition for investors, feels G P Gupta, the chairman of the countrys largest mutual fund.

Commenting on the plans for restructuring the institution, Gupta said: UTI has been operating quite well under the present concept. Besides, there is the issue of costs involved. We would not be able to keep the fee as low as the current levels if we go in for the holding company model. However, a final decision has still to be taken by the Centre and the Securities & Exchange Board of India (Sebi), he added.

 

The current UTI structure is governed by a Parliamentary Act. It operates as a trust managed by a board of trustees, which appoints employees who perform the functions of an asset management company.

However, the Sebi regulations for mutual funds specify the concept of three entities for a mutual fund, namely the trustee, the sponsor and the asset management company (AMC). In order to fit into that requirement, the UTI board had recommended the three-entity holding company concept for the institution.

Senior UTI officials have pointed out that since the institution does not currently have a separate asset management company the concept of an AMC fee does not arise, ensuring low fees. Besides, the changes required in the UTI Act to enforce the holding company concept are not clear.

The new model which UTI is adopting as an interim recast for the mutual fund has been forwarded to Sebi and is pending approval. There was considerable debate within UTI about whether or not to go in for an interim arrangement of setting up three asset management companies since the broader restructuring would be carried out only after some time.

The three asset management companies would manage UTIs 69 schemes by categorising them under the income and growth categories. Two asset management companies would manage one category each respectively, while the third would concentrate on the Rs 15,000-crore US-64 scheme. The AMCs would be managed by separate committees.