Sebi panel to take key decisions on mutual funds today

Written by fe Bureau | Mumbai | Updated: Jun 1 2010, 01:58am hrs
The advisory committee of mutual fund formed by the market regulator Securities and Exchange Board of India (Sebi) is set to meet on Monday to take some key decision on mutual funds. Concerns like mis-selling in mutual funds, fees charged by the asset management companies (AMC) and reducing exposure to the equity derivatives will be discussed in the meeting.

According to a senior official from a leading fund house and member of the committee, Sebi might ban fund houses from selling equity options as they face huge risks if the bets go wrong. Also they might be asking fund houses regarding their exposure in the equity derivatives. In fact, every six months the fund house do make declaration of their scheme wise equity derivative exposures via advertisements in the national financial dailies.

The other important issue to be exchanged in the meeting will be of Real Estate Mutual Funds (REMFs) as even after two years of guidelines by Sebi it has not seen the light of the day. The main problem faced by the fund houses to launch the REMF was regarding the calculations of net asset value (NAV) as there were problems in valuations of property. National Housing Bank made attempts to launch a real estate index, but none is available till date on the public domain.

Sebi in its circular in April 2008 had stated that NAV of the scheme shall be declared daily and each asset shall be valued by two valuers, who are accredited by a credit rating agency, every 90 days from date of purchase. Lower of the two values shall be taken for the computation of NAV. There are some issue on the valuations side, so we hope the Sebi comes out with some relief on the issue in the meeting.

It is also believed that, Sebi might bring some changes in the investment management fee charged by the AMC. Currently they charge a maximum of 1.25% pa of the total assets from the expense ratio which is capped at 2.5% annually for equity schemes. Its likely there will be scope to charge a flat fee or one that is linked to performance.