The Hindu Business Line : `MF industry should look at other growth options'

Small and large
Mutual funds need to look at new products in order to attract smaller investors and ensure that the industry does not become stagnant.
Liquid funds by themselves cannot sustain the mutual fund industry in the long-term.

WORD OF ADVICE: Mr M. Damodaran (left), Chairman, SEBI, with Mr Mr. U.K. Sinha, CMD, UTI Asset Management Company Pvt. Ltd, at a Mutual Fund Summit held in Mumbai on Wednesday. - Paul Noronha

Mumbai June 20 Indian mutual fund industry needs to look at other options to grow rather than rely on fund inflows from corporates, said Mr M. Damodaran, SEBI Chairman, here today.

Speaking at the CII Mutual Fund Summit, he said large funds from corporate houses invested in mutual funds could generate a possible conflict of interest.

New products

He said mutual funds need to look at new products to attract smaller investors and ensure that the industry does not become stagnant.

"Liquid funds by themselves cannot sustain the mutual fund industry in the long-term. If large liquid funds come from corporate houses, it is not a healthy indication. It hints at exclusion (of retail investors)," said Mr Damodaran.

He said the Association of Mutual Funds (AMFI) could count on SEBI to work with them to put new products in place.

Mr Damodaran asked AMFI to take up the role of a self-regulatory organisation (SRO).

`Best candidate'

"I believe that logically, AMFI is the best candidate to become the first SRO in the financial sector. If you take AMFI as a trade body that represents asset management companies, I believe it is uniquely positioned to play this role," he said.

In response to this suggestion, Mr A.P. Kurien, AMFI Chairman, said the association would keep an open mind on the suggestion. "We will study different models and try to evolve a new model that will serve SEBI's objectives and address our concerns," he said.

On the issue of governance, Mr Damodaran suggested mutual fund could assume a slightly more pro-active role in the companies invested in.

Stressing on the need for mutual fund trustees taking higher level of responsibility, Mr Damodaran said SEBI would shortly convene a meeting of trustees to discuss the subject.

He observed that it was on the strength of trustees' names that investors part with their money.

Revised regulations

He added that SEBI was in the process of writing out revised regulations that will entrust trustees with a higher level of responsibility in the mutual fund industry.

Responding to the AMFI's proposal to introduce PAN as a sole identification for investors in a phased manner, Mr Damodaran said the regulator might look into the suggestion. SEBI has mandated that by July 2, PAN will be the sole identification number.

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