Over the past few years that the mutual fund industry has existed it has not grown as much as people would like you to believe it has. There are about 800 schemes – equity / predominantly equity schemes. If you sort the folios PANCARD wise, I do not think there are more than 100,000 reasonably active mutual fund accounts. This in spite of the Industry saying that it has 40,00,000 active SIPs. I could be wrong. However there are some things which the regulator has done which look, well almost Quixotic. No I am not the first guy to use the word Quixotic in this context :).
1. Changing the load structure to be fully trail based: The industry tries telling the advisor..look at the trail. The adviser is wondering what if the trail is reduced / withdrawn? People with a trail income based model go for a toss?
2. Debt securities valuation: creating a new method of valuation could have been more gradual – this change will wipe out a few months nav growth.
3. The last nail: The buying and selling of mutual funds through broker terminals. This will mean the NISM ‘exam’ will be a mockery. If Sebi tells me they have the infrastructure to ensure that all people operating the 200,000 terminals pass the exam, I would be tickled. However that is not my problem. Too fast entry and exit into schemes will hurt the long term investor. Let us take the example of Hdfc Top 200. It has THE largest equity scheme and has approximately Rs. 8000 crores as corpus. If say the inflows on 3 days is Rs. 1000 crores, Rs. 1200 crores, and Rs. 800 crores – the fund manager WILL NOT BE ABLE TO INVEST – surely not in 3 days. Say he invests 500 crores in 3 days. The balance cash will take longer amount of time to be invested. Now the ‘trader’ oriented guy could take a daily view, a weekly view, a quarterly view…..how much cash will the fund manager keep to meet the redemption pressure? We can only guess.
Let us have a 2 minute silence for the investor..and in this case even the industry..
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