SEBI Chief reportedly
cites positive inflows in 2011-12 while acknowledging the fall in folios.
Over the past few days, there has been a buzz in the media
about how entry loads could make a comeback.
But judging by SEBI Chairman UK Sinha’s comments at Chennai
yesterday, it seems that the regulator has not been approached by any party for
reintroduction of entry loads. “No one has brought the matter to us so far; no
one has written or asked for that, but we are worried as to why the penetration
of mutual funds in remote areas is not increasing,” he has been quoted as
saying in various media reports.
In fact, Mr Sinha pointed to the positive net inflows in
equity funds for the financial year 2011-12. In 2010-11, the net inflow in
equity schemes of the mutual fund sector was down by about Rs 13,000 crore,
while in 2011-12, the net inflow was higher by Rs 600-700 crore. “This is an
encouraging development considering that the number of mutual fund folios were
down in 2011-12,” he said.
Mr Sinha added that mutual fund inflows had
declined even in more mature economies.
Though re-introduction of entry loads might not
be high on the agenda, various distributor associations (and a few AMCs) have
been requesting SEBI to introduce some form of advisor compensation, as clients
in India have yet to move to a fee-based model.
“Entry load has already come back in the form
of transaction charge. The issue is that distributors want a percentage share
as an upfront commission. If for example, they mobilize Rs 1 crore they can get
Rs. 1 lakh even if 1% entry load is introduced.
I don’t see any scope for bringing back entry load as this might be seen
as an anti-investor move,” says a CEO of a bank sponsored fund house.