The market regulator said the mutual fund industry was doing fine and industry representatives agreed. That was the overriding theme at the Business Standard Fund Café, organised here today.
K N Vaidyanathan, executive director of the Securities and Exchange Board of India, who was the chief guest, said the average of assets under management (AUM) reached a record level in 2009-10. Referring to the perception that equity AUMs were doing badly, Vaidyanathan said these actually went up to Rs 177,000 crore in the year from Rs 150,000 crore in 2008-09. Of every four asset management companies, three made profits in the period.
“The regulator’s focus is on investors, nobody else,” he said. Defending Sebi’s decision to ban entry load, Vaidyanathan said distributors were gaining at the expense of investors. The top 10 distributors cornered around 30 per cent of the commissions and they earned profits which were 25 times what the industry as a whole generated in 2008.
On the general criticism about Sebi’s tough measures, he quipped that the man who first said the world is round was beheaded.
Speaking on ‘Mutual Funds: the strategies for survival’, he complimented the industry for “standing like a man” during the slowdown of the 2008 financial crisis. Vaidyanathan said the industry should now concentrate on building trust, scale (“few products, but real big ones”) and infrastructure in terms of reach and distribution. “The cost of investment in the secondary market is less than half basis points, compared to 8 basis points in the mutual fund industry. That’s 16 times more expensive,: he said.
The industry agreed with Sebi’s views that almost all was well and that mutual funds were doing well. Sundeep Sikka, CEO of Reliance Capital Asset Management Company, said: “Direction is important and not speed. Fifteen months is a short period to adjust to regulatory changes.”
Sandeep Dasgupta, CEO, Bharti AXA Investment Managers, felt the industry needed to build sticky assets so that it could serve investors better. “We have to gain investor confidence,” he added.
While there was consensus that the new guidelines would strengthen the industry in the long run, some felt there was a need to take another look at some of these. “The regulator should take a relook at some regulations to see if there is a need for some course correction,” said A Balasubramanian, CEO of Birla Sun Life AMC.
Rajan Mehta, executive director with Benchmark Asset Management Company, said there were ways of reaching out to the masses through the exchange platform and offering low cost services.
