Private sector fund houses are hoping that the government will pay heed to SEBI’s recommendation on allowing Central Public Sector Enterprises (CPSEs) to invest in private sector mutual funds.
“Presently, Navratna and Miniratna Central Public Sector Enterprises (CPSEs) are permitted to invest in public sector mutual funds regulated by SEBI. It has been recommended that all CPSEs be allowed to choose from any of the SEBI registered mutual funds for investing their surplus funds,” stated SEBI press release.
Private sector fund houses have been lobbying with the government to relax this rule for a long time now.
“It will benefit mutual funds as wells as PSUs since these companies will have a wider choice. They’ll have a wider range of investments to choose from,” said Himanshu Vyapak, Deputy CEO, Reliance Mutual Fund.
The
government had formed a committee – Department of Public Enterprises (DPE) for
reviewing the investment guidelines for investing surplus funds available with
CPSEs in 2012. According to DPE, there are 14 Navratna 72 Mininratna companies.
These companies typically invest in bank fixed deposits and liquid schemes of
mutual funds. Canara Robeco, UTI, SBI, LIC Nomura, IDBI and Union KBC are eligible to get
investments from CPSEs.
“Not all public sector fund houses get investments from these companies. They have certain criteria based on which they decide their allocation. They take into account the track record and AUM of the fund house. Allowing CPSEs to invest in private sector fund houses may not help expand the industry as they’ll only get a share of the same pie,” said G Pradeepkumar, Chief Executive Officer, Union KBC Mutual Fund.
Fund officials from private sector fund houses expect to get sizeable inflows from these public sector enterprises if government relaxes the investment norms.
“It will benefit PSUs as they will get a wider choice of investments. PSUs are cash rich and a sizeable amount of inflows can get into private sector fund houses,” said Raghav Iyengar, EVP & Head – Retail & Institutional Business, ICICI Prudential Mutual Fund.
Public sector mutual funds are those in which Government of India, its financial institutions and public sector banks holds/hold individually or collectively more than 50 % of equity/shares in the AMC.
According to rough industry estimates, PSUs have invested close to Rs. 30,000 crore in schemes of public sector mutual funds.
