The Hindu Business Line : MFs' compliance costs hurt investors: Damodaran

(left to right): Mr A.P. Kurian, Chairman, Association of Mutual Funds of India; Mr Mahendra K. Sanghi, President, Assocham; Mr M. Damodaran, Chairman, UTI AMC Ltd; Mr S.K. Jindal, Chairman, Committee on Investments & Capital Markets, Assocham; and Mr Murali Venkatraman, Vice-President, Madras Chamber of Commerce and Industry, at a summit on mutual funds in Chennai on Saturday. — Shaju John

Chennai , June 19

THE mutual fund investor is hurt by the high cost incurred by the industry in complying with regulatory requirements, Mr M. Damodaran, Chairman, UTI Asset Management Company, has said.

The industry has to meet stringent compliance requirements.

He was addressing a summit here on Saturday on `Wealth management by mutual funds' organised by the industry and the two chambers of commerce (Associated Chambers of Commerce and Industry of India and Madras Chamber of Commerce and Industry).

The industry had "extraordinary functional compliance standards to measure up to," he said.

Mr Damodaran concluded that mutual funds' investors finally paid for costs incurred in complying with regulatory requirements.

He placed the issue in the context of an improvement in the capital market's systems over the last few years. The market is well regulated today and the regulator, Securities and Exchange Board of India, is approached for help by authorities in the developed countries.

He also made a case for calibrating the tax regime to encourage investment in mutual funds.

He linked the popularity of mutual funds as an investment avenue to the capital market's vibrancy.

He drew the participants' attention to the importance of the capital market in raising resources for industry.

His speech also addressed the investors directly in relation to the consolidation under way in the mutual fund industry. He urged investors not to panic in the event of a fund in which they have invested was taken over by another fund. Generally, the stronger players in the business would take over others, he said.