Mumbai, Oct 12 (PTI) Sebi’s recent guidelines on consolidation and merger of mutual fund schemes will make it simple for the investors to compare various mutual fund schemes being offered by the fund houses, the experts said.
Moreover, it will reduce the clutter and make it simple to compare performance amid a level-playing field, they added.
In a bid to reduce the number of schemes in mutual funds, Sebi recently came out with uniform definitions for fund categories. Sebi’s move will be applicable only on open-ended funds being offered by the fund houses.
The market regulator has broadly divided mutual funds into five categories- equity funds, debt funds, hybrid funds and solution-oriented funds and other funds. Sebi has asked fund houses to adhere to these guidelines within two months in letter and spirit.
“In the maze of more than 2,000 schemes, an investor gets confused. In a simple category, like large-cap fund, he gets confused by a large number of categories,” Nilesh Shah, managing director, Kotak Mutual Fund told PTI.
“Some balanced funds have higher equity allocation while others have lower equity allocation. Then, there are mid-cap funds with large-cap stocks and some even have small-cap stocks,” he said.
Shah said, consequently the investor looks to invest, based on the performance comparison without realising that he is comparing apple and oranges.
According to Shah, Sebi’s move will reduce the clutter and make it simple to compare performance amid a level-playing field.
Overall, there are 2,000 funds in the industry. Out of them, 1,200 are close-ended funds, 830 open-ended funds.
Again, within those 830 open-ended funds, around 120 funds have been excluded by the market regulator. So, it is the remaining 710 funds, which are likely to be affected by the Sebi notification.
Out of the 710 funds, 220 are equity funds and the remaining 490 are debt funds.
Again, all the 220 equity funds are to be classified into 10 sub-categories. Similarly, 490 debt funds are to be classified in 16 sub categories.
The 220 equity funds may be reduced to around 210, whereas the 490 existing debt funds may come down to 450.
However, no major reduction is likely to take place among the 30-35 balanced funds the industry has got with itself.
Each MF house is likely to end up with a maximum of 40 funds in its bouquet of offering in future.
“There is no great reduction in the number of schemes of the recent Sebi norms the fund houses are already having,” Manoj Nagpal, chief executive, Outlook Asia Capital, a wealth management consulting firm, said.
But, the benefit of the investors is that if he invests in a particular category of funds with specific objective that he can be sure of investing for long term remains to be the same, he added.
This is published unedited from the PTI feed.