MFs gear up to meet investor rider fallout

Fund houses, pending a clarification from the Securities and Exchange Board of India (Sebi) on the 20,25 norm, have already taken steps to ensure that they are not unduly hit by the winding up of the schemes at the end of the year.

The 20,25 norm stipulates that a scheme should have a minimum of 20 investors and no investor should hold more than 25 per cent of the assets.

Schemes, which do not meet this criteria by December 31, 2004, will automatically have to wind up. Sebi, however, has to clarify whether the scheme is applicable at the portfolio level or plan level (each scheme may have several plans). The hit will be more for funds if it is at the plan level.

Krishnamurthy Vijayan, chief executive officer of J M Mutual Fund, said, "Funds have already taken steps to minimise the impact by asking investors to switch over to other schemes."

He said against the earlier estimate of a Rs 30,000-40,000 crore outflow from the segment owing to the winding up of the schemes, the outflow would be restricted to Rs 5,000 crore.