Funds Divided Over Number Of Participants Needed Per Scheme

Mumbai, Sept 25: | Updated: Sep 26 2003, 05:30am hrs
With the market regulator Securities and Exchange Board of Indias (Sebi) insistence on promoting retail participation in mutual fund (MF) schemes, fund managers seem to be clearly divided in their opinion about stipulating a minimum number of retail participants for each scheme. Though a cross section feels it should be applicable only to forthcoming schemes, others are of the opinion that these regulations should be implemented with retrospective effect as well.

The Association of Mutual Funds in India (Amfi), a representative body of the MF industry, is expected to present a report to Sebi based on the recommendations of the MF industry on the issue at the end of this month.

Confirming the ongoing groundwork being conducted for this purpose, AP Kurien, chairman, Amfi, said: Retail investors across the board have to realise that there are certain schemes like institutional plans and fixed maturity plans that are not best suited to their needs.

However, there are a host of other schemes housed under the various mutual funds which are aptly poised to give the best market-related returns, and our aim is to gear up to the best of our abilities to promote retail participation in such schemes. he added adopting an objective stance.

Of the belief that such regulations should be applicable only to the forthcoming schemes, SK Mitra, managing director, Birla Sun Life

Asset Management Company said, Although multi-investor participation is a welcome suggestion, we have to keep in mind that it might hurt the interest of the existing clients of the schemes that are running by default. Therefore to impose participation in such existing schemes would be unfair to these clients, and thus I feel that such regulations, if any should be applicable only with prospective effect.

Nearly echoing his view, NK Sharma, CEO IL&FS Mutual Fund, said, There are several MF schemes that are running successfully by participation of a handful of investors who have been there from its inception. However it cannot be denied that there are many schemes functioning as portfolio management services (PMS) and need to be mooted. I however feel that these best practices, being brought about by the regulator should be applicable to forthcoming schemes, for the smooth functioning of the industry.

However strongly in favour of the regulations being implemented in retrospective, AK Sridhar, CIO, UTI Mutual Fund said : Ideally, the recommendations to go retail should be applicable to all existing schemes of mutual funds and not only the ones to be launched henceforth. The total corpus size of a scheme divided by the number of investors gives us the average investment in the scheme. This is how we function at UTI Mutual Fund and thus have a transparent track record of the number of investors in each of our schemes, he added.

Convinced that MFs have a long way to go with regard to optimum retail participation, Sanjay Sachdev, chief executive officer (CEO), Principal Asset Management Company, said: A lot has to be done in mutual funds in terms of retail participation. In fact, some schemes are still run like portfolio management schemes (PMS) having merely two or three investors. This brings about a lot of instability and perhaps is one of the reasons why the industry is facing the problem of a stagnating corpus, he added.

A close look at investors participation in 560 MF schemes reveals that almost 50 per cent of the schemes have only 10 per cent retail participation. Most of these schemes are housed under the categories of liquid, liquid growth, institutional and fixed maturity.