Capital market regulator Sebi today said it will question top officials of fund houses about non-performance of mutual fund schemes and probe their non-compliance with the stated investment objectives.
Concerned over the non-performance of some schemes over a long period of time,Securities and Exchange Board of India (Sebi) Chairman U K Sinha said that fund houses need to look into the matter and consider merger of some schemes.
Mutual Funds Check for top funds
Speaking at a CII mutual fund summit here,Sinha also said that the regulator would conduct inspection on AMCs (Asset Management Companies) for not following rules with regard to the fund objectives.
Every mutual fund scheme has a stated investment objective and they are supposed to invest accordingly.
Sinha said Sebi is considering questioning CEOs and fund managers of the mutual fund schemes,which are not performing over a long-term basis since inception.
“Management (of mutual funds) should look into the areas of no-performance,” he said,adding that he is in favour of merger of schemes on case to case basis.
Sinha also said that nothing prevents fund houses to come up with pension schemes,but the issue of taxation needs to be solved.
“We are in touch with tax authorities and have sought similar treatment with the pension products,” he added.
About the recent flight of capital invested through P-Notes (Participatory Notes that allow rich foreign investors to invest indirectly through India-registered FIIs),Sinha said that P-Notes have come down in the last few months and the government and Sebi are encouraging QFI investment into the country.
The government recently came up with guidelines for encouraging overseas inflows through Qualified Financial Investment (QFI) route,which provides easier and more cost-effective compliance mechanism for foreign investors.
Sinha also said that Sebi would soon come up with IPO guidelines regarding the safety margins,but did not give any
Fund houses welcome Sebi move on under-performing schemes
Mutual fund houses have welcomed market regulator Sebi’s decision to probe heads of the fund houses for non-performance saying it will increase their accountability
“I think this is a welcome step. It should lead to accountability on the part of fund houses for non-performance and will also encourage them to perform better,” HDFC Asset Management Company managing director Milind Barve told reporters on the sidelines of a CII summit on MF here.
Sebi Chairman U K Sinha today said it is concerned about non-performance of MF schemes and will probe their non-compliance with the stated investment objectives.
The regulator said funds performing poorly over long periods of time needed to answer not just to unit holders,but also to the regulator.
“It is a cause of concern. There are at least 9 fund houses’ schemes which have underperformed and some have since inception. These schemes failed to match returns of their benchmark index. Sebi is considering questioning CEOs and fund managers of the mutual fund schemes,which are not performing over a long-term basis since inception,” Sinha told reporters.
Other fund houses have also echoed similar sentiment. “I think,it is a very good thing. We have to be benchmarked and performance will be the best indicator,” Tata Asset Management Company president and chief executive Sanjay Sachdev said.
He also said there will be some kind of consolidation on the products front as there are many products which are not related to investors’ interest adding that this will also encourage product innovation.
On this matter,HSBC Asset Management Co chief executive Punnet Chadda said it is a welcome move as fund houses will now be accountable to their investors.