Focus more on retail investors, MFs told

Asking mutual fund industry to stick-on to know-your-customer (KYC) norms by implementing them in letter and spirit, the Securities Exchange Board of India (SEBI) Chairman, C. B. Bhave, on Wednesday said that increased focus on retail investors was the key to the growth of the mutual fund industry.
“If the mutual fund industry wants diversity, importance of non-corporate investors should be realised. It is in the interest of the industry to have increased investor participation,” said Mr. Bhave. He was speaking at the Fifth CII Mutual Fund Summit-2009 on “Indian mutual fund industry — the future in a dynamic environment” organised by Confederation of Indian Industry (CII) here.
The SEBI chief said though the mutual fund industry had passed unscathed in the recent global crisis, there were certain issues, particularly in the way liquid schemes of mutual funds were structured, which need to be tackled. He said that in the case of fixed maturity plan schemes, mutual fund houses should refrain from offering securities which were fixed but whose underlying assets were beyond the tenure of those securities. While replying to the industry’s concern on the issue of KYC norms, Mr. Bhave said that KYC was not difficult but a requirement in the interest of the investor and the industry as a whole. He said that while distribution commission on insurance products was larger than on mutual fund products, it was for the industry players to educate the investors of the cost implications and returns in both kinds of products and thereby generate greater volumes. Earlier in his welcome remarks Arun Nanda, Deputy Chairman, CII Western Region, said that the mutual fund industry was still at its nascent stage and collaborative efforts for growth were essential. He also highlighted the role of the retail investor by saying that though India had close to 39 per cent savings rate, the retail side was quite untapped by the industry.
The summit also witnessed the release of CII-KPMG report on Indian mutual fund industry — the future in a dynamic environment. While assessing the current state of the mutual fund industry, the report laid down the challenges of low customer awareness, financial literacy and limited retail penetration among others for the growth of the industry.
PTI reports from Delhi:

Anchor investors
With not many initial public offerings (IPOs) hitting the market, SEBI may on Thursday assess whether a new entity, named anchor investors, be allowed to take part in the public offers to boost the sagging primary market.
The SEBI board is likely to discuss the issue of anchor investors threadbare to spur the IPO market, official sources said here.
Anchor investors (AI) are long term investors and if the IPO issuer can find anchor investors, it indicates that the company enjoys good reputation and its public offer could be a success.
An AI would be required to pay a margin of 25 per cent on application with the balance 75 per cent to be paid within two days of the date of closure of the issue. AI would be asked to bring in the additional amount if the price fixed for IPO is higher than that paid by this new form of entity. As per the proposal to be discussed by the SEBI board, 30 per cent of the portion for qualified institutional buyers in an IPO will be reserved for anchor investors. At present, 50 per cent of the IPO size is reserved for qualified institutional buyers.

Source: http://www.hindu.com/2009/06/18/stories/2009061855961600.htm