Page 24 - BANKING FINANCE JANUARY 2016 ONLINE
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MUTUAL FUND
Tata Mutual Fund eyes reforms windfall, but new plans Mutual Fund agents'
face risk hurdle upfront fee to be capped
Tata Mutual Fund has announced five from the fund house also brings in a at 1 per cent
new fund offerings (NFOs) and is re- multiple fund manager approach
launching an existing fund, under an where each fund will have a lead fund After the Sebi chairman U K Sinha
umbrella called "Own a Piece of India", manager who is also supported by one sent a strong message to the mutual
theme. The new funds are
- Tata Banking and Finan- or more fund managers in fund (MF) in-
cial Services Fund, Tata In- the portfolio manage- dustry to re-
dia Consumer Fund, Tata ment process. duce upfront
Digital India Fund, Tata In- commission,
dia Pharma & Healthcare Financial planners believe most mem-
Fund and Tata Resources & such sectoral and the- bers of AMFI,
Energy Fund. The existing fund that matic funds hold concen- the fund in-
comes under the theme is Tata Infra- trated portfolios and since dustry trade
structure Fund. they buy stocks in a single sector or body, agreed
theme, they are exposed to high risk. to cap it at 1% of the total amount
These are sector-specific and thematic "There are several funds within the that an investor invests in a scheme,
funds that will invest in stocks (a mini- same segment which have a track effective January 1, 2016.
mum of 80% of a scheme's total cor- record.
pus) which come under the sector Upfront commission is the payment
where each fund will focus. The fund Investors wanting an exposure to some that a mutual fund agent or a dis-
managers believe that the govern- themes would do well to invest tributor gets from the fund house for
ment will usher in reforms that will through them, rather than opting for selling an MF scheme to the investor.
push growth which in turn will benefit an NFO where the portfolio and style
these sectors. This new fund offering is unknown," says Vishal Dhawan, chief Some mutual funds pay upfront com-
financial planner, Plan Ahead Wealth missions of as much as 6% in some
Advisors. closed-ended equity funds, and be-
tween 1% and 2% in equity funds.
Equity Mutual Fund folio surges by 27 lakh Market regulator Sebi eared that
such high upfront commission could
Equity mutual funds witnessed an ad- cial crisis in late 2008. From March lead to misselling of mutual fund
dition of nearly 27 lakh investor ac- 2009, as many as 1.5 crore folios had products and, hence, was insisting on
counts or folios in the first eight been closed. a cap on such payments.
months of the current fiscal, primarily
on account of strong retail Before 2014-15, there was a complete A few months ago, a government
participation. This follows lull in equity inflows as well panel had also suggested rationaliz-
an addition of 25 lakh folios as generation of new fo- ing commissions for selling various
for the entire last fiscal, lios, but in the past one financial products. The cap on
2014-15. year, equity markets have upfront commission, however, will
come back to life and neither benefit nor affect mutual
According to Sebi data on investor ac- fund investors, but will reduce the
counts with 44 fund houses, the num- yielded solid returns. risk of them being induced to invest
ber of equity folios jumped to in unsuitable or wrong funds.
34,367,673 last month from Industry experts said heightened inves-
31,691,619 at March-end, a gain of tor interest has led to a sharp increase In comparison, commissions in the
26.76 lakh. April 2014 saw the first rise in retail folios. It is the optimism of in- insurance industry could be as much
in more than four years. vestors because of which the folios in as 35% for some products. The indus-
equity segment have increased. Mu- try also witnesses a large number of
Prior to 2014-15, equity MF sector had tual Funds have reported net inflows of cases of mis-selling, mainly because
seen a continuous closure of folios since Rs 66,314 crore in equity schemes in of the high commission structure.
March 2009, following the global finan- the first eight months of 2015-16, help-
ing the industry grow the folio count.
24 | 2016 | JANUARY | BANKING FINANCE
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