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Mutual fund industry body AMFI may soon suggest making it mandatory for fund houses to disclose the investments made in them by group companies, which is estimated to be well above Rs one lakh crore.
The move follows leading fund house Reliance Mutual Fund voluntarily disclosing such investments, which stood at 3.2% of its total asset base of about Rs 1,02,487 crore as on December 31, 2013.
Becoming the first fund house to make such disclosure, Reliance MF also said that it expects others to follow suit.
The Association of Mutual Funds in India (AMFI) Chief Executive H N Sinor could not be reached for comments.
However, industry sources said guidelines to make this disclosure mandatory are expected soon.
Mutual fund industry experts also welcomed the disclosure of group investments in their own AMCs (Asset Management Companies).
According to Prithvi Haldea, Managing Director, Prime Database, such kind of disclosure is a very good move as investors are generally guided by rankings and these rankings may change if group investments are excluded from the AUM.
"Besides, such disclosures, there should be separate rankings as per investor class and instruments as well which will give the small investors the right perspective," Haldea added.
Many large fund houses have significant chunk of investments coming from their group entities, and so the ranking as per average AUM (Assets Under Management) does not show the true strength of a mutual fund.
Echoing similar sentiments, fund tracking firm Value Research Online CEO Dhirendra Kumar said: "It is a very good move and other fund houses should also follow suit."
Investments coming from group entities is not a bad thing but investors should be aware of such developments, which would help in making the system more transparent, Kumar added.
A senior AMFI executive on condition of anonymity said investments of group companies in their own AMCs is not wrong and such disclosures are not likely to have an impact on retail investors as a whole. Moreover, it also shows the confidence of companies in the fund management system.
Fund houses have so far not been disclosing the exact amount of investments by their group companies in their respective schemes, but industry estimates suggest that such investments vary from as low as 3% to as high as 20% for different AMCs.
According to industry estimates, group firms have investments to the tune of Rs 15,000 crore in Birla AMC, while for ICICI AMC the amount stands at Rs 12,000 crore, HDFC AMC between Rs 10,000 to Rs 15,000 crore, Religare AMC Rs 5,000 crore, Tata AMC between Rs 8,000 to Rs 10,000 crore.
