The Hindu Business Line : `MF industry must consolidate, have bigger, stronger players'

Mr M. Damodaran, CMD, UTI Asset Management Company Ltd; Mr D.C. Gupta, Finance Secretary; Mr K.L. Chugh, Chairman, Assocham Knowledge Committee; and Mr D.R. Mehta, former SEBI Chairman, at a summit in the Capital on Saturday. — Kamal Narang

New Delhi , March 27

THE mutual funds industry must get into consolidation mode and turn itself into one that has "bigger and stronger players," according to Mr M. Damodaran, Chairman and Managing Director, UTI Asset Management Company Pvt. Ltd (UTIAMC).

UTIAMC manages the country's largest mutual fund - UTI Mutual Fund (UTIMF), which has a corpus of over Rs 15,000 crore.

"Industry needs to witness consolidation. We cannot have too many small players too long which is hurting the cause of industry," Mr Damodaran said in his address at a national summit on `Emerging role of mutual funds in wealth management,' organised by the Associated Chambers of Commerce and Industry of India (Assocham).

Mutual funds have more than 30 players offering more than 400 schemes. The total assets under management of the industry are about Rs 1,50,000 crore.

Mr Damodaran used the occasion to flag a number of issues that are impacting the growth of the industry. In particular, he highlighted the trend of "disproportionate emphasis" by the industry on "coming up with esoteric products."

"For the first-time investor in mutual funds, we need to have simple products that can be explained. I believe we have been frightening the average first-time potential investor with plethora of products having offer documents that run into several pages," Mr Damodaran said.

He underscored the need for the industry to continuously address the existing trend of "mis-selling" of products.

"We cannot continue to mis-sell products. We must also educate the investor that investment in mutual funds is not risk-free," he said.

The UTIAMC chief also expressed concern over the phenomenon of large distributors having a disproportionate say in determining the schemes that would be suitable for investors without actually addressing the risk appetites of those investors.

Another area of concern, which he described as an internal issue, related to the aspect of competition.

"Many of us within the industry have worked hard to ensure that industry does not grow. In attempts to run down competition and divert the existing investors from one fund house to another, we have raised doubts in the minds of investors to an extent that they decide against investing in any mutual fund. We have to make a common effort to grow the cake, notwithstanding the damage it would cause to our existing share of the cake", Mr Damodaran said.

UTI Mutual Fund eyes pension market

UNIT Trust of India Mutual Fund (UTIMF) is quite hopeful of becoming a pension fund manager in the reformed pension market.

"As soon as the Pension Fund Regulatory and Development Authority invites applications, UTIMF would apply for becoming a pension fund manager. We are confident that UTIMF will be able to become a pension fund manager," Mr Damodaran told presspersons here.

When asked whether UTIMF would seek foreign tie-up for carrying on the activities as a pension fund manager, he held that UTIMF is big enough and that it does not need to stand on any crutches.

The pension authority has fixed an internal cap of a maximum of nine pension fund managers, including a single public sector entity, which would be licensed by the regulator.