Downgrades: Sebi wants real-time reporting to MF trustees

Market watchdog Sebi has asked mutual fund houses to report the downgrades in the bonds in which they invest to their trustees on a real-time basis and then to the regulator on a monthly basis.
"As and when there is any downgrade taking place in the bonds in which we invest our funds, the market regulator has asked us to report about it to the trustees of the company's board on a real-time basis. It may be followed by reporting to Sebi on the downgrades on a monthly basis," Reliance Capital Asset Management Company president and chief executive Sundeep Sikka told reporters here today.

Asked if there was any redemption pressure on his company, he said that "there would be some redemptions, but not much".
"Apart from returns, the investors today are looking for things like quality of portfolio, research capability at the back-end and above all, net worth of the company."
Sikka also said, "Debt and retail debt in particular is the focus of Reliance Cap AMC now."
He added "My company's exposure to the bonds having below -AA credit rating is less than 5 per cent of company's debt portfolio now."

Talking about the Sumit Bose committee report which is likely to be discussed during the industry body AMFI's board meeting here tomorrow, Sikka, chairman of AMFI, said, "The report is aligning the industry to the investors and is in-line with the long-term growth of the industry. As industry grows, the investors gain and participants should determine the fee for the industry and brokers."

Agreeing with the panel's recommendation that mutual fund houses should be allowed to manage the retirement fund and Ulip fund which are currently managed by the life insurers, he said, "It is an accepted worldwide practice and hence there is no wonder if it is implemented in the country too."
He also favoured the committee's recommendation that additional benefit given to the fund houses and distributors for selling the products in B-15 cities be removed.
Currently, MFs are allowed to charge an additional 30 basis points (0.30 per cent) to the total expense ratio if 30 per cent of the fresh fund flow is from B-15 cities.

The panel report says that MFs and distributor should tap such unexplored markets on their own to increase sales.