Predominantly a regulation driven industry, the year 2009 saw far reaching steps taken by SEBI both regarding the Management of Fund operations and also the revamping of Distribution.
Bond Funds got the maximum from the Regulator this year: The year started with clamping 30% upper limit on the Money Market Instruments of an entity other than Governmentof India in the Total Funds invested by a Fund. The culprits of October 2008 liquidity crunch, the liquid plus schemes were asked to limit themselves into 91-day spectrum by May 01, 2009. Even the use of the words"liquid plus" was to be ceased. The valuation norms were re-stored to pre-October 2008 levels.
The practice of propagating the expected yield and portfolio in the case of Fixed Maturity Plans were banned
Again the portfolio declaration of Debt Funds was given clarity by prescribing Issuer class and content for the instruments from the Maturity, Secured/Unsecured, Quality and Coupon angles.
The other important step was on the distribution side: Front end loads got abolished; Exit load was rationalised for all class of investors. And a new channel for distribution was created by allowing a platform exclusively for trading in Mutual Fund units. But here is a catch: Brokers normally deal with short term perspective on hihly risky equity & Derivatives of different types; whereas the MF products are of long term perspective being risk adjusted portfolios.NSE opened the chanel on November 30, 2009 & BSE on December 04, 2009.
This is bringing a new culture to the investors: paying for the services of the distributor, which was absent previously.
The other step SEBI initiated was on the governance side: The Trustees of the Mutual Fund has to certify the need for bringing out a new scheme. The product innovation and product differentiation wil get a boost enabling the investors in better financial planning.
The reduction in filing fees was relief for fund houses that were frequently bringing out schemes. The Technology audit has become compulsory for this industry. Soft copies of 'SAI' and 'SID' will hencefoth will be displayed on both websites of AMFI and SEBI
The new faces that were on the stage belonged to Shinsei and Axis, although former was toying the idea of stake sales by the year end. Goldman Sachs, though took the approvals in 2008, not responded during 2009.
2009 was also noted for entry of sectoral funds in the debt segment. Sinsei MF and Baroda Pioneer MF were seen pushing the trend.
A study conducted by ICRA has revealed that during 2008-2009, the investor class that remained more than an year with fund houses was the Individual investor. This gives reasons for fund houses to design exlusive programms for them.
Wish you happy investing!!
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