• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Nilanjan Dey

Kolkata , Oct. 15

SCHEMES with single or a small number of unit holders continue to plague the Association of Mutual Funds in India (AMFI), which has recently recommended that a scheme should have at least 20 investors, with no single entity holding more than 25 per cent of its assets.

The general AMFI membership seems to be split between players who would rather let matters remain what they are, that is allow the schemes with small investor bases to continue uninterrupted, and those who would rather push such schemes to change the situation in favour of more investors over a period of time, say one year.

The recommendation that has been sent to the market regulator is simple enough, said Mr A.P. Kurian, Chairman of AMFI. "At the core of our proposal lies the minimum number of unit holders per scheme, with no one acting as the dominant force," he said. "We have suggested that these basic criteria would immediately apply to new schemes, the ones that are to be launched in future. The minimum standards should be maintained periodically and not on a daily basis," he added.

The association has further proposed that a newly-introduced scheme should achieve the standards within three months of its initial issue. The idea is to give a fresh entrant enough time to cope with the realities.

The AMFI view may be seen in the context of high concentration of investors, mostly of the wholesale variety, in a number of schemes, including fixed maturity and other short duration plans. It was also the case with a few equity schemes. Such concentration, as investment circles point out, could be dangerous if the wholesale investors in question decide to pull out unexpectedly. The smaller ones would suffer as a consequence, particularly when the overall asset base is small.

According to a review conducted by Value Research, an agency that tracks mutual funds, more than dozen schemes (all launched in the recent past) had a single investor in each. Chola Gilt Series 2003, for instance, had its entire assets — around Rs 170 crore — on account of just one entity.

The list prepared by Value Research, pertaining to asset bases recorded on March 31, 2003, covered schemes of various hues - equity, including tax-saving and index schemes, as well as debt - introduced by fund houses, large and small. And, the schemes that had extra-large investors (commanding substantial portions of the assets) included those managed by players such as Prudential ICICI, Franklin Templeton, Tata and Principal.

Article E-Mail :: Comment :: Syndication

Stories in this Section
Tata group cos exempted from open offer for TFL

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line