AMFI has approached SEBI requesting it to modify the disclaimer ‘Mutual fund investments are subject to market risk’, said C.V.R. Rajendran, CEO, AMFI at the Network FP National Conference held in Mumbai today.
He said that AMFI has requested SEBI to replace the term ‘market risk’ with ‘market fluctuation’ in the mutual fund advertising disclaimer.
Fund officials say that the term ‘risk’ in disclaimer connotes a negative meaning in the minds of investors. “Mutual fund is the only product where you have to run a disclaimer. This connotes a negative image about mutual funds,” said a senior official from a private sector fund house.
“We have to make the mandatory disclosure ‘Mutual funds are subject to market risk. Please read the offer…’ which puts the MF industry in a disadvantageous position. The insurance firms advertise ULIPs which also come with market risk but they are not required to make such a disclosure. Brokerage houses do not have to put such a disclaimer. This makes investors perceive mutual fund as a risky product. However, mutual funds are a relatively safer way for investors to participate in equities unlike direct equity,” said the marketing head of a bank sponsored AMC.
However, some distributors say that replacing the term ‘market risk’ with ‘market fluctuation’ will not create much difference. “Investors seldom read the fine print. It will not make much impact on investor’s decision to invest in mutual funds,” said a Mumbai based distributor.
SEBI’s stringent advertisement rules make it difficult for fund houses to convey their messages in a simplistic manner, say fund officials. “Mutual funds have consistently outperformed the benchmark. For e.g. Rs.10,000 invested in a few equity funds has grown to Rs.9 lakh in 20 years. We want to convey these messages to investors,” said the CEO of a large fund house.
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