In a recent meeting of mutual fund advisory committee (MFAC) headed by Arundhati Bhattacharya, former SBI Chairman, it has been reportedly decided that close end equity funds would not be approved unless they are unique.
A top fund official who attended this meeting told Cafemutual that the market regulator has expressed its concern over growing number of close end NFOs. “The idea behind scheme re-categorization was to bring uniformity across fund houses and rationalize the number of schemes. However, many fund houses have been launching series of close end schemes having similar features as that of their open-ended counterparts,” he added.
AMFI data shows that the mutual fund industry has received net inflows of close to Rs.19,333 crore from 42 close end equity funds last financial year. Most of these funds are series of mid and small cap funds. Only a few funds offered unique proposition last year.
So far, the industry has seen net inflows of Rs.3550 crore from 13 close end funds in the first four months of FY 2018-19, shows AMFI data.
It is pertinent to mention here that SEBI has expressed its concern over unusually high commission payouts to distributors by select fund houses. A few fund houses pay aggressive commission to distributors particularly on close end equity funds.
Another key decision at the MFAC meeting was the constitution of a committee to draft a FAQ on mutual fund regulations. The CEO of a private fund house said, “Due to frequent regulatory changes and amendments to the mutual fund regulations, we, at times, get confused on how to ensure compliance with the norms. Hence, we sought SEBI’s direction through FAQs to bring uniformity in our practices.”
