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Mutual fund industry suffers from SEBI norms
By siliconindia
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Mumbai: As the Securities and Exchange Board of India (SEBI) has amended the norms for close-ended schemes, mutual fund industry in the country is now seeking for some structural changes and they are looking for alternatives to the fixed maturity plans (FMPs). SEBI had recently made it mandatory for fund houses to list close-ended schemes and restricted early withdrawals.
FMP as one of the popular offerings from fund houses has scored over inter-corporate deposits and fixed deposits in terms of higher yields and post-tax returns. SEBI's new rule is expected to affect the well going mutual fund industry which has already marked a rapid growth in asset under management (AUM) as a result of the success of FMPs. Industry estimates show that within the next six months FMPs worth 
60,000-70,000 crore will come up for redemption. Finding an alternative to FMPs would be the major challenges before the 4.22 lakh-crore MF industry.
CEO of a foreign fund house opined, "One of the main issues before us is where will this money find its way. Unless an equal or substitute product is introduced, these funds may flow out of the MF industry." The crisis has made most of the companies to adopt a wait-and-watch policy for a couple of months before launching any new schemes.
"There will be structural changes in the product, as the listing fee is an additional expense that has to be included now," said another senior official of a large domestic fund house. Association of Mutual Funds in India (AMFI) is in talks with stock exchanges to reduce the listing fee structure for AMCs.
SEBI reviewed the norms after large corporate rushed to redeem their investments in FMPs, which resulted in considerable pressure on fund houses.
60,000-70,000 crore will come up for redemption. Finding an alternative to FMPs would be the major challenges before the 4.22 lakh-crore MF industry.
CEO of a foreign fund house opined, "One of the main issues before us is where will this money find its way. Unless an equal or substitute product is introduced, these funds may flow out of the MF industry." The crisis has made most of the companies to adopt a wait-and-watch policy for a couple of months before launching any new schemes.
"There will be structural changes in the product, as the listing fee is an additional expense that has to be included now," said another senior official of a large domestic fund house. Association of Mutual Funds in India (AMFI) is in talks with stock exchanges to reduce the listing fee structure for AMCs.
SEBI reviewed the norms after large corporate rushed to redeem their investments in FMPs, which resulted in considerable pressure on fund houses.