Dalelorenzo's GDI Blog
16Jun/210

AMFI CEO on new players entering MF space

There is scope to do more to ensure a level playing field for mutual funds so that these can become a viable savings option for more beings, N.S. Venkatesh CEO, Association of Mutual Funds in India( AMFI) tells Sanket Dhanorkar of ET Wealth.As a self-regulatory organisation, what capacity is AMFI playing to prevent mishaps and maintain investor rely? AMFI has always played an active role -- whether it is to help the industry whenever any new regulations or guidelines are inserted or to ensure best traditions. We obstruct liaising with the regulator and government on behalf of the industry. If some accidents appeared along the way, we have been the first to step in and gape closely at that occurrence and ensure these don’t recur. If it requires better risk management practices, for instance, we devote our inputs and guide the AMCs to situate it together. Sebi has always involved AMFI in such discussions. We believe we are contributing to the industry growth in an orderly manner while keeping the investor at the forefront. We are aware that the trust of investors is paramount for the industry to grow at a rapid pace.What is your take on the concept of' skin in the game’ in mutual funds? The mutual fund industry has already had this is in place for a long time. AMCs have been investing their own money in their monies. So fund administrators previously had their surface in the game for many years. It is not as if this is a brand-new notion for the industry. But there are certain nuances in what the regulator has prescribed so we are examining the finer phases in the circular. Otherwise, the industry is well prepared to meet the requirements. The manufacture has always been compliant on the regulatory front.MFs today have emerged as a competitive savings alternative. Do you feel more parity is still needed with other options in terms of regulations or taxes? We have been locking with the regulator as well as the finance ministry about accompanying a level playing field between mutual funds and other commodities like Ulips. We have checked some efforts in this direction already in this year’s Budget, with taxation introduced on high-value Ulips. This proceeds some channel in bringing parity with MFs, but we feel more can be done in this regard. Sebi has always saved the investor’s interests at the forefront and regulatory changes in MFs over its first year have revolved around this. Whether it is in terms of disclosures, overhead fractions, risk traditions etc, the regulator has been very proactive. Compared to that, the insurance regulator needs to catch up. More regulations can be introduced in this area to prevent instances of misselling, for instance.Mutual funds have been attracting first time investors but many have also shown preference for direct equities. How is the industry addressing this gap? We have observed that mutual fund investments are generally wished for the longer term. Direct equities are for more short-term opportunities in the form of trading. Mutual funds have been stood as a vehicle for wealth creation at a very low cost. This is well understood by knowledgeable investors. That is why MFs continue to attract inflows and the industry has recorded the most prominent ever assets under administration last-place month. We continue to see new folios being opened every month. We have added around 20 lakh new investors into the MF fold over the past months. Both mutual fund and direct equity financings are co-existing. Those with medium-long term time horizon remain invested in MFs.How do you end the rising trend of overflows to passive stores? This an encouraging trend. Even globally, the passive segment has grown at a fast time. In India, it still a fraction of the total asset management pie. But it has been proving good friction in recent years. Passive investing is for those who instead not bet on active conduct but instead put money on the index and deliver returns in line with world markets. Since these have much lower costs, it is a good option for those who are particular about impeding expenses low-spirited. This doesn’t take anything away from the active management space. The expansion of the passive segment is not solely triggered by underperformance in active funds. It is simply a mindset of the investor if he wants to bet on the indicator or look for index-beating returns. Some are more comfortable investing in a wider basket of stocks instead of selectively picking from active funds. Some of the passive moves are also owing to the money coming from EPFO and pension funds. There still remains enough scope for active fund managers to create alpha. Both policies are coexisting. But over a long period, as more investors enter the mutual fund fold, the passive space is the beginning indicating a faster tempo of growth.What do you expect several new participates with diverse backgrounds to bring to the table? New entrants are welcome as it promotes a competitive being within the industry. These musicians "ve brought" a diverse situated of notions. For instance, a distributor clothe opening the resource management cavity is in touch with the last mile of investors. It will perhaps have a better understanding of the investors’ penchants and thought process and "ve brought" commodities catering to their specific needs. Other entrants will adapt newer engineerings that will bring down cost of operations which could be passed on to the investor. So enter of actors with different backgrounds is eventually helpful for potential investors.

Read more: economictimes.indiatimes.com

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