Icra unveils governance ratings for MFs

Rating agency Icra Ltd has launched a product for grading the management and governance quality of mutual funds. The timing of the launch is of significance as it followed the shutting out of Alliance Mutual Fund chief Samir Arora from the markets by the market regulator on the ground of insider trading.

Icra managing director P K Choudhury said the grading would be a symbolic indicator and was a result of an assessment of the management quality of the asset management company. According to him, the grading would be a derivative of the evaluation of the relative abilities of the investment managers' decision making, risk management and financial strength and transparency in the fund's operations.

The grading, which would be reviewed once in a six month unless circumstances demanded early review, would remain valid for two years from the date of assignment.

"The continuous monitoring process would enable investors to derive greater comfort, as they would get updated opinions at regular intervals," he added.

Experts said the product, which would be introduced shortly, would help small investors to take a call on which fund to select.

T P Raman, managing director, Sundaram Mutual Fund, said the concept of grading the managerial and governance quality of the fund houses was required.