The idea of consolidation of mutual fund schemes has found takers in the domestic fund market but, according to industry players, the process is tedious and cumbersome. The Securities and Exchange Board of India (Sebi) recently expressed its reservations on mushrooming of mutual fund products in the market.
Last week, Sebi Chairman C B Bhave said if the industry threw over 3,000 schemes at investors, how could one expect them to make a choice. He further said there were several schemes that had not even reached a critical mass.
Industry chief executives and chief investment officers told Business Standard that they supported the market regulator’s views, but reasoned that the industry was still in its nascent stage and there was scope to come up with more products.
The process of merging schemes was tough, the CEO of a leading fund house said. “It changes the investment objectives, especially for smaller schemes. Though Sebi’s stand is sinking in and we find that aligning some of the schemes will be economically good, the regulator needs to come up with some special window so that the consolidation process is made easier and smoother.”
Some of the fund houses did not buy Sebi’s argument of there being too many schemes. They believe, as ‘manufacturers’, they need to offer customers several schemes to choose from.
“Look at any other industry. For instance, the FMCG players. The companies in the sector have a lot of products to offer. Same goes for banks and insurance companies as they keep coming up with schemes. Then why is the mutual fund industry being singled out?” asked the chief investment officer at one of the top five mutual fund houses in the country. “The industry has not reached a stage which could result in overlapping of products,” he further said.
A Balasubramanian, CEO of Birla Sun Life Mutual Fund, said: “We do merge schemes as and when there is a necessity to do so. However, as of now, there is none.”
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The chief marketing officer of another leading fund house said: “We have felt there is a need to re-align schemes as we genuinely need to simplify products by consolidating smaller schemes for good economic scale. Though it is tough, it is a fair process. It means fundamental changes in investment strategies.”
Nimesh Shah, CEO of ICICI Mutual Fund, said: “I am not aware whether there is any such consolidation process of schemes in the industry. But, at ICICI MF, we have got schemes which are different from each other.”