Small fund houses are up in arms against the SEBI Mutual Fund Advisory Committee’s recent proposal to raise minimum net worth of fund houses having AUM of less than Rs 1000 crore to Rs 25 crore within three years.
Presently, fund houses have to maintain a minimum net worth of Rs. 10 crore.
The 16-member committee is headed by Janki Ballabh, former Chairman of the board of trustees of UTI Mutual Fund. One of the members of the committee told Cafemutual that the committee had placed the recommendations before SEBI after discussing the issue with small players; however, some such fund houses are not convinced and argued that the high net worth will adversely affect the growth of industry.
Earlier, SEBI chairman UK Sinha in a CII MF Summit said “I am very clear, that this industry needs some very serious players. Only 1 per cent of the AUM is from the bottom 10 AMCs. This percentage has not changed substantially in the last five years. It gives an impression that we have got some non-serious players in the industry.”
Parag Parikh, CEO, PPFAS says, “Net worth has nothing to do with seriousness of a player. MF business is not about hiring big names, it’s only about commitment and professionalism for the industry. The regulator should let new players to enter the market so as to increase competition. This will encourage innovation and healthy business environment."
AMC’s having AUM of less Rs 1000 crore
|
AMC |
AUM as on September 20,2013 |
|
ING |
761 |
|
Motilal Oswal |
437 |
|
Quantum |
301 |
|
PPFAS |
267 |
|
Escorts |
252 |
|
Sahara |
233 |
|
IIFL |
207 |
|
Edelweiss |
194 |
“Earlier, I was of the view that promoter should have a huge net worth to run a mutual fund business efficiently just like insurance and bank. However, after seeing brilliant performance and commitment of small fund houses like Quantum and PPFAS, I have changed my view. Instead of focusing on net worth of small players, the regulator should look at the performance of a fund house,” says a senior official of a mid-sized fund house having net worth of Rs 250 crore.
However, some big and mid-sized fund houses seem to be comfortable with the proposal. Nilesh Sathe, Director & CEO, LIC Nomura MF says that maintaining a net worth of Rs 25 crore may not be a big deal for small sized fund houses. “It will also encourage them to run their business effectively,” he said.
