Guidelines on real estate mutual funds next week

ON HIGH ALERT: M. Damodaran (left), Chairman, Securities and Exchange Board of India, with Farhad Forbes, Chairman, CII (Western Region), at the CII Mutual Fund Summit 2006 in Mumbai on Thursday. Photo: Paul Noronha  

Special Correspondent

Call for greater role by mutual fund trustees in new fund offerings

MUMBAI: The guidelines for launching real estate mutual funds will be announced next week and Capital Protection Schemes will be launched next month, M. Damodaran, Chairman, Securities and Exchange Board of India (SEBI), said here on Thursday.

(Under capital protected or capital guarantee schemes, operating in some countries, mutual funds are allowed to guarantee preservation of the capital investment of the investor, and often at the same time stipulate a ceiling on the return to the investor).

Growth performance

Launching of Indian mutual fund schemes aimed at overseas investors was under active consideration as a follow-up to the Finance Minister's announcement in his budget speech, Mr. Damodarn said at the Confederation of Indian Industry's (CII) Mutual Fund Summit 2006, `Indian mutual fund industry: Generation next,' here.

Mr. Damodaran complimented the mutual fund industry on its growth performance over the past year. According to him, the industry growth has been beyond figures and mutual funds have done excellent work in reaching out to new segments and adopting a better fee structure.

However, SEBI Chairman called for a greater role on the part of mutual fund trustees, especially in relation to new fund offerings. He said mutual funds should not only publicise new offerings but also their existing schemes. Before launching any new fund offerings, they should first verify that the ambit was not already covered by one of their existing, older offerings.

Stressing the need for greater retailisation by mutual funds, Mr. Damodaran said that while incidences of mis-selling had substantially declined, they had not been eliminated entirely. He asked mutual funds to ensure that they alerted investors about aspects like ups and downs in the stock markets. There was reasonable money to be made in this asset class if investors took informed decisions, he felt.

SEBI was taking several measures to check the market volatility. It was monitoring the market movement on a real time basis to avert any kind of manipulations, Mr. Damodaran said on the sidelines of the Summit.

S. V. Prasad, Chairman-CII Mutual Fund Summit 2006, and CEO, Birla Sun Life Asset Management Company Ltd., pointed out that even today, debt and cash funds constituted 60 per cent of the industry.

A. P. Kurian, Chairman, Association of Mutual Funds in India (AMFI), highlighted the fact that the Indian mutual fund industry grew by 65 per cent on a year-on-year basis during 2005-06 compared to just 9 per cent in 2004-05. Distribution should be looked at in a more holistic manner, considering the possibility of having a monitoring mechanism or revising business practices, he said.