Sebi asks MFs to simplify new fund offers
Tuesday, 23 November 2010
MUMBAI, Nov 22 (Economic Times): Concerned that mutual fund schemes are becoming too complex for average investors, capital market regulator Securities and Exchange Board of India (Sebi) has asked several asset management companies to rework some proposed new schemes and file offer documents afresh.
More than a dozen new fund offer (NFO) prospectuses of leading mutual fund houses such as Reliance MF, ICICI Prudential, Birla Sunlife Mutual Fund, Kotak Mutual Fund, Tata Mutual Fund and Benchmark Asset Management are awaiting approval from the market regulator. The regulator is particularly skeptical about capital protection schemes.
According to sources, four fund houses have been asked to withdraw applications to launch capital protection schemes. The regulator was not comfortable with the quality of debt papers that these funds were planning to invest in.
A typical capital protection scheme, or CPS, will invest a small portion of the pool in equities, while the larger portion (about 80 per cent) would remain in debt and money market instruments.
By allocating a portion to equities, the fund will participate in the upside during bullish phases and offer downside protection in a bearish market.
Sebi wants us to include some more features that will provide an additional safety net for investors. Changes in current structure will, however, reduce the flexibility of the fund," the official added.
The regulator is also going slow on approving structured mutual fund schemes where instead of investing in equities and debt in a pre-determined ratio, the fund manager is given the flexibility to adopt complex strategies.
More than a dozen new fund offer (NFO) prospectuses of leading mutual fund houses such as Reliance MF, ICICI Prudential, Birla Sunlife Mutual Fund, Kotak Mutual Fund, Tata Mutual Fund and Benchmark Asset Management are awaiting approval from the market regulator. The regulator is particularly skeptical about capital protection schemes.
According to sources, four fund houses have been asked to withdraw applications to launch capital protection schemes. The regulator was not comfortable with the quality of debt papers that these funds were planning to invest in.
A typical capital protection scheme, or CPS, will invest a small portion of the pool in equities, while the larger portion (about 80 per cent) would remain in debt and money market instruments.
By allocating a portion to equities, the fund will participate in the upside during bullish phases and offer downside protection in a bearish market.
Sebi wants us to include some more features that will provide an additional safety net for investors. Changes in current structure will, however, reduce the flexibility of the fund," the official added.
The regulator is also going slow on approving structured mutual fund schemes where instead of investing in equities and debt in a pre-determined ratio, the fund manager is given the flexibility to adopt complex strategies.