AMFI initiates study on common online platform

The Association of Mutual Funds in India (AMFI) has initiated a study to form a common online platform which would facilitate investors and distributors in mutual fund transactions, A.P. Kurian, Chairman, AMFI, said here on Saturday. 

The association is also looking to simplify the process of application for different mutual funds by introducing a common application form for all asset management companies, he said. Talking to reporters on the sidelines of a Mutual Fund Summit organised by the Indian Chamber of Commerce, Kurian said: “A committee of seven-eight members is currently exploring the formation of an industry-wide common online platform which would help in buying and selling of all types of mutual funds available in the market.” 

The new system would take a few months to be implemented, he said. In response to a question whether the mutual fund brokers would become redundant in such an arrangement Kurian said the role of brokers would still be essential in providing investment advisory services. 

Application forms 

In regards to the introduction of a standardised application form across all mutual funds he said the investors currently faced a lot of complication in filling up forms of varied formats for different funds and the new system would simplify the process. 

A committee formed by AMFI is currently looking into the matter. The application forms should also categorically mention the amounts of commission to be paid for different services, he said, adding, “This would lead to a more transparent and open way of commissioning.” 

AMFI has recently submitted a proposal to the Security and Exchange Board of India to introduce variable pricing of distribution. This would ensure that the investors also had a role in deciding the commissions depending upon the service availed by them, he added.

Sebi mulls variable load structure for MF distributors

Securities & Exchange Board of India (Sebi) is looking to have a variable load structure for mutual fund distributors. The commission in the variable load structure regime, as proposed by the Association of Mutual Funds in India (Amfi) board, would depend on the quality and nature of service and advice given to an investor. 

Speaking to reporters after the one day seminar ‘ICC Mutual Fund Summit 2008’ organised by the Indian Chamber of Commerce here on Saturday, Sebi executive director R K Nair said: “In global markets, investors have a choice. They have different load for different services. We too are working towards it.” 

Incidentally, entry load is a charge levied on investors by a mutual fund in case an investor decides to invest in the scheme. Open ended mutual fund schemes charge anything between 2 % and 2.5% of the amount invested under different heads like marketing cost and distribution commission. 

Elaborating further, Amfi chairman A P Kurian said, the commission paid to distributors is not linked to the quality or extent of service as well as the nature or quality of advice. 

“In case Sebi clears the proposal, distributors along with the investor can jointly work out their commission depending on the quality of service or the nature of advice. The rate will largely depend on the extent of service and advice gven to the investor and will find mention in the investor’s application form,” he added.' 

“Since the variable load factor regime is a common practice in developed markets, Indian mutual fund industry should also strive towards this,” Mr Kurian said. 

This apart, Amfi is also working to have a structured common application format for all mutual fund schemes across the country instead of having different application forms from different mutual fund houses. The association is yet to take up the issue with Sebi.

Japanese giants eye Indian MF market

Though the market meltdown has hit the domestic mutual fund industry and affected investor sentiment temporarily, it hasn’t deterred global biggies from going ahead with their India plans. At least three financial giants from Japan — known for their conservative approach — are looking at setting up asset management business in India. 

Japanese financial conglomerates — Nikko, Nomura and Shinsei Bank — are exploring various options to enter the Indian mutual fund market, top mutual fund sources said. Nomura, which has signed an MoU with Life Insurance Corp (LIC), is likely to get a stake in LIC Mutual Fund. Shinsei Bank already has a relationship with India as it runs an asset management business with Guernsey-based UTI International Ltd, a wholly owned subsidiary of UTI Asset Management Company. 

“The Indian mutual fund industry has a huge growth potential and foreign players are looking at tapping it,” said Association of Mutual Funds of India chairman A P Kurian. “Some Japan-based pension funds are also looking at investing in India. But they’re likely to come as foreign institutional investors registered with market regulator Sebi. A major reason for the increasing Japanese presence in India is that they are wary of the kind of returns they can hope for in saturated US and European markets,” said a mutual fund source. 

It is not only Japanese companies that are making a beeline to enter the growing MF market but European companies are also heading to South Asia. While UK-based Schroder has plans to set up shop in the coming months, Belgium-based KBC Asset Management Company has announced its joint venture with Union Bank of India. Union Bank will have a 51 per cent stake in the joint venture company while KBC will hold the remaining 49 per cent stake. 

These new entrants will face tough competition from other foreign players like UBS, Goldman Sachs Group, Morgan Stanley and Credit Suisse, which have been studying the market dynamics for quite some time now. 

To cash in on the 50-60 per cent growth in assets under management that the industry has seen in the past, domestic stock broking houses are also eyeing a share of the pie. Indiabulls, Motilal Oswal and India Infoline also have plans to launch MF schemes soon. The average assets under management of the industry fell by 6 per cent in July to Rs 5.30 lakh crore.