115 MF debt schemes need to comply with Sebi norms
115 MF debt schemes need to comply with Sebi norms
By Ravi Ranjan Prasad Jun 23 2014
More than 115 schemes from debt and balanced fund category will have to ramp up their assets under management to comply with latest Securities and Exchange Board of India (Sebi) directive on maintaining Rs 20 crore minimum assets under management (AUM).
Concerned over fund houses running debt schemes with very low AUM, the market regulator issued a circular last week saying an average AUM of Rs 20 crore on half yearly rolling basis would have to be maintained for open-ended debt-oriented schemes. There are 116 schemes belonging to debt and balanced category with less than Rs 20 crore AUM as on May 31, 2014 as per data compiled by corporate data firm Capitaline.
Out of these, 49 schemes have less than Rs 5 crore assets and 15 schemes have less than Rs 1 crore AUM.
Barring a few, all the major funds have debt schemes where AUM is below the prescribed limit.
Sebi has been concerned about fund houses operating MF schemes with low AUM.
"It's a prudent measure, as minimum investment size in any corporate debenture is Rs 5 crore as that is the market lot, finding a paper to invest with less than Rs 5 crore amount will remain a challenge for any debt scheme," Sunil Subramaniayam, Sundaram Mutual Fund CEO said.
In some cases, AUM is very close to the minimum requirement and MFs could comfortably raise the assets.
But experts feel that schemes with very low AUM may have to wind up, especially those with less than Rs 5 crore. Renu Pothen, research head, iFast Financial India said, "Sebi's move is a step in the right direction. This is because as debt funds are considered to be the favourites of institutional investors, a small corpus can cause a lot of volatility in case of a sudden exit by these investors. This in turn can lead to a loss of confidence among retail investors who have parked their surplus in these funds."
For existing open-ended debt-oriented schemes with less than Rs 20 crore AUM, Sebi has given one year to comply with the guidelines.
Interestingly Reliance MF, Franklin Templeton Mutual Fund, Quantum Mutual Fund are some of the fund houses where all debt schemes are adhering to the minimum Rs 20 crore AUM.
Some of the fund houses are not happy with Sebi's move. Jimmy Patel, Quantum Mutual Fund CEO said "Performance of funds should have been taken into consideration too while setting minimum AUM limit. Maintaining AUM depends on the nature of the product. The fund houses will be forced to get Rs 20 crore AUM leading to their heavy reliance on distributors."
"It will become a survival game for those not able to ramp up their individual scheme's AUM," Patel said.
In some cases, the fund houses will look at merging the schemes to comply with Sebi norm. Schemes which are similar in nature from a particular fund house but have different portfolios and net asset value or NAV cannot be merged, mutual fund experts said. However, fund houses that have acquired schemes of other MFs could go for mergers. For instance HDFC MF may look at merging funds it took over from Morgan Stanley MF that have low AUM. Likewise, Birla MF may do the same with ING Vysya Mutual Fund schemes it acquired.
| mydigitalfc.com
Thanking you
Regards,
Rajesh Kumar Kathpalia ¤ SMC Global
17,Netaji Subhash Marg,Daryaganj,
New Delhi-110002 Mobile No 9891645052
Email Id: rajesh.ipo@smcindiaonline.com
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By Ravi Ranjan Prasad Jun 23 2014
More than 115 schemes from debt and balanced fund category will have to ramp up their assets under management to comply with latest Securities and Exchange Board of India (Sebi) directive on maintaining Rs 20 crore minimum assets under management (AUM).
Concerned over fund houses running debt schemes with very low AUM, the market regulator issued a circular last week saying an average AUM of Rs 20 crore on half yearly rolling basis would have to be maintained for open-ended debt-oriented schemes. There are 116 schemes belonging to debt and balanced category with less than Rs 20 crore AUM as on May 31, 2014 as per data compiled by corporate data firm Capitaline.
Out of these, 49 schemes have less than Rs 5 crore assets and 15 schemes have less than Rs 1 crore AUM.
Barring a few, all the major funds have debt schemes where AUM is below the prescribed limit.
Sebi has been concerned about fund houses operating MF schemes with low AUM.
"It's a prudent measure, as minimum investment size in any corporate debenture is Rs 5 crore as that is the market lot, finding a paper to invest with less than Rs 5 crore amount will remain a challenge for any debt scheme," Sunil Subramaniayam, Sundaram Mutual Fund CEO said.
In some cases, AUM is very close to the minimum requirement and MFs could comfortably raise the assets.
But experts feel that schemes with very low AUM may have to wind up, especially those with less than Rs 5 crore. Renu Pothen, research head, iFast Financial India said, "Sebi's move is a step in the right direction. This is because as debt funds are considered to be the favourites of institutional investors, a small corpus can cause a lot of volatility in case of a sudden exit by these investors. This in turn can lead to a loss of confidence among retail investors who have parked their surplus in these funds."
For existing open-ended debt-oriented schemes with less than Rs 20 crore AUM, Sebi has given one year to comply with the guidelines.
Interestingly Reliance MF, Franklin Templeton Mutual Fund, Quantum Mutual Fund are some of the fund houses where all debt schemes are adhering to the minimum Rs 20 crore AUM.
Some of the fund houses are not happy with Sebi's move. Jimmy Patel, Quantum Mutual Fund CEO said "Performance of funds should have been taken into consideration too while setting minimum AUM limit. Maintaining AUM depends on the nature of the product. The fund houses will be forced to get Rs 20 crore AUM leading to their heavy reliance on distributors."
"It will become a survival game for those not able to ramp up their individual scheme's AUM," Patel said.
In some cases, the fund houses will look at merging the schemes to comply with Sebi norm. Schemes which are similar in nature from a particular fund house but have different portfolios and net asset value or NAV cannot be merged, mutual fund experts said. However, fund houses that have acquired schemes of other MFs could go for mergers. For instance HDFC MF may look at merging funds it took over from Morgan Stanley MF that have low AUM. Likewise, Birla MF may do the same with ING Vysya Mutual Fund schemes it acquired.
| mydigitalfc.com
Thanking you
Regards,
Rajesh Kumar Kathpalia ¤ SMC Global
17,Netaji Subhash Marg,Daryaganj,
New Delhi-110002 Mobile No 9891645052
Email Id: rajesh.ipo@smcindiaonline.com
--
You received this message because you are subscribed to the Google Groups "Product Updates for AMC" group.
To unsubscribe from this group and stop receiving emails from it, send an email to Productupdatesforamc+unsubscribe@googlegroups.com.
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