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Private equity firms may soon be allowed to enter the mutual fund business. SEBI has formed a committee to look into the issues that may arise if such firms are allowed to act as sponsors of an asset management company.
"(The working group is tasked) to recommend mechanisms for addressing conflict of interest that may arise if pooled investment vehicles/ private equity act as Sponsor," SEBI said.
Currently, only financial services company which are older than 5 years and have a sound track record can start a mutual fund business. There are additional criteria like positive net worth in all of the last 5 years.
The working group is headed by AMFI Chairman A Balasubramanian and has SBI MF's D P Singh and SEBI's ex-executive director J Ranganayakulu as members among others.
Further, SEBI has also asked the committee to examine if there is a need to revise the existing requirement for sponsors to hold at least 40% stake in the AMC.
The regulator has been making efforts to foster competition in the industry and facilitate fresh flow of capital to drive innovation. In December 2020, the regulator eased the profitability criteria for qualifying as sponsors, enabling fintechs to enter the mutual fund space.
In the past, some private equity firms have shown interest in entering the mutual fund space. In 2020, the world's largest private equity firm Blackstone was said to be in talks to acquire L&T Mutual Fund. However, the deal didn't materialise and L&T Mutual Fund was finally bought by HSBC Mutual Fund in December 2021. Reports said the deal fell through due to regulatory hurdles.
