Following SEBI’s diktat, the mutual fund industry will start contributing one basis point of AUM to AMFI from April. AMCs are supposed to give 50% of their IAP fund in the first week of every month to AMFI, i.e. they will hand over the IAP corpus accumulated in April in the first week of May.
Also, AMCs have already shared 50% of the unspent IAP corpus accrued till March 2016 to AMFI, said two industry officials.
Based on AUM of Rs. 12.32 lakh crore as on March 2016, AMFI will have Rs. 123 crore to invest in creating awareness about mutual funds this year. This means the industry body will get Rs. 10 crore every month from the industry.
With this sizeable budget at AMFI’s disposal, its committee on financial literacy is expected to discuss the ways to promote mutual funds at the industry level on a bigger scale. Recently, AMFI CEO C. VR. Rajendran had said that the industry body is open to suggestions on conducting IAPs.
In one of the recent meetings which industry officials had with SEBI, there was a discussion around using celebrities to promote mutual funds. “While there was no formal proposal from AMFI the SEBI official said they don’t have a problem if AMFI ropes in celebrities to endorse mutual funds,” said a senior official from a large fund house who attended the meeting.
“Using celebrities like Amitabh Bachchan has worked well for spreading awareness about polio eradication. Similarly, if SEBI allows AMFI to rope in celebrities it will help create a higher recall for mutual funds as a category,” said the above quoted official.
While SEBI rules don’t permit AMCs to use celebrities, insurance regulator IRDAI does not have such restrictions. In fact, a lot of insurance firms use celebs to advertise their products.
To spread awareness about mutual funds in hinterland, AMFI had run television advertisements under its ‘Savings Ka Naya Tareeka’ campaign in vernacular languages. If SEBI permits AMFI to rope in celebs to endorse mutual funds, fund officials say that it will provide the much needed impetus to the industry.
However, some industry officials believe that while investing in IAPs will help create buzz about mutual funds, ultimately there is a need to strengthen the distribution network to grow the category. “A lot of AMCs are already running TV commercials and doing outdoor advertising. However, only education will not empower investors. You need distributors to handhold investors. We need to be able to measure the efficacy of the efforts by seeing how many new investors are we able to add,” said the marketing head of a public sector fund house.
Apparently, few members of AMFI’s financial literacy committee had proposed using IAP funds to strengthen the distribution network. But fund officials say that this suggestion is yet to find favor with the regulator.
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