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Journalism of Courage
For mutual funds investors, there’s some good news on the horizon. The market regulator will soon come out with guidelines for capital guarantee funds, real estate funds and gold exchange traded funds in a bid to deepen and mutual fund sector.
Sebi chairman M. Damodaran on Thursday said mutual funds will soon be allowed to launch new plans that will guarantee the investor’s capital.
In a market filled with me-too offerings from mutual fund houses, capital guarantee funds guarantee the repayment of principal. However, it’s not a guaranteed rate of return. The only thing guaranteed is the return of principal. Sebi is now working on the guidelines for capital guarantee products.
The Sebi chairman also indicated that guidelines for real estate funds would be announced by next week. ‘‘Gold Exchange Traded funds would be next on the agenda of the regulator,’’ Damodaran said while addressing a CII seminar on mutual funds here.
The scope for launching Indian mutual fund schemes aimed at overseas investors is also under active consideration of the Sebi.
‘‘Though the incidence of mis-selling has reduced completely,’’ said the Sebi chairman, ‘‘I am not happy to note that it has not exactly gone away.’’ Sebi chief also urged mutual fund chiefs to communicate better to the investors about their products.
On the large number of NFOs hitting the market of late, the Sebi chairman noted whether the industry needed so many NFOs. ‘‘When you announce a new fund you come with a fancy new name and a new label, but it’s almost identical to an existing product.’’
He said that there will be greater involvement of the trustees in the conduct of their businesses. ‘‘It will henceforth be necessary for trustees to certify that any new product launched is not similar to an existing product,’’ he said. ‘‘Unless trustees certify, Sebi will not clear the scheme.’’
According to him, the industry growth has been beyond figures and mutual funds have done excellent work in reaching out to new segments and adopting a better fee structure. ‘‘I believe mutual funds today are far more significant than they were a year ago. It is time to press down the accelerator,’’ he said.
He also asked mutual funds to ensure that they alert investors about aspects like ups and downs in the stock markets. ‘‘There is reasonable money to be made in this asset class if you take informed decisions,’’ he felt.
