In order to expedite the scheme consolidation, SEBI is planning to come out with the uniform definitions for all categories of mutual fund schemes. Simply put, the market regulator will define various categories of mutual fund schemes such as large cap, mid cap and multi cap schemes.
SEBI’s Mutual Fund Advisory Committee (MFAC) discussed this in the meeting held today in Mumbai, said two people aware of the development.
A senior official who attended this meeting told Cafemutual that the market regulator would soon come out with the regulations on scheme consolidation. “There will be a common definition for all mutual fund products which the MF industry needs to adhere to. This will help rationalize the number of schemes to a large extent.”
He said that MFAC believes that this will push fund houses to de-duplicate their multiple offerings within the same category.
Currently, the industry has over 2000 schemes. It is alleged that multiple funds in the a category from the same fund house creates confusion among distributors and investors.
SEBI has been pushing fund houses to merge schemes to reduce confusion among investors. However, the industry has not seen many scheme mergers so far.
Among key reasons for this reluctance are difficulty in retaining existing assets, higher expense ratio in small sized funds (scheme merger increases AUM) and large number of schemes increases probability of a few schemes doing well.
