Appeal Of Mutual Funds Needs To Be Broadened: Sebi Chairman

Mutual funds need to be popularized beyond top 50 cities in the country, Securities and Exchange Board of India (Sebi) Chairman Ajay Tyagi said on Tuesday. He, however, lamented that the industry's penetration beyond the top 15 or top 30 cities had remained stagnant around 15-17 per cent over the past five years. “We need to clearly strive more to make mutual funds popular in beyond-top 50 cities in the country,” he said in his address to industry body Association of Mutual Funds in India (Amfi).

The attraction of mutual fund schemes has been largely restricted to urban parts of the country, he said. Sebi has started incentivising mutual fund investments beyond top 15 and top 30 cities across the country.

But, despite the efforts of Sebi, the mutual fund activity has been largely confined to the top cities, Mr Tyagi said.

The Sebi chief also said that despite the challenges and uncertainty arising from Covid-19, the overall fundraising activity has been encouraging.

He highlighted that net positive inflows into mutual funds in each of the last five years averaged Rs 1.89 lakh crore.

The figure for the current financial year till August 2020 is Rs 1.99 lakh crore, he added. In the last five years, the mutual fund industry's assets under management (AUM) grew 154 per cent from Rs 10.83 lakh crore to Rs 27.94 lakh crore.

Mr Tyagi cautioned mutual funds that they are are not, and should not, behave like banks. "Debt mutual funds are not banks and should not behave like one," the Sebi chief said. Debt mutual funds must remember that there is a difference between investing and lending, and protect the interest of unitholders, he added.

The top Sebi official also addressed concerns about multi-cap schemes. He asserted that the market regulator was not forcing anyone to invest in small-caps and all investments should be done in the best interest of the investors. Multi-cap mutual fund schemes should be "true to label". 

Earlier this month, Sebi had made it mandatory for multi-cap funds to invest a minimum 75 per cent of their assets in stocks, with an equal allocation of 25 per cent each between large-, mid- and small-cap shares.

Meanwhile, Sebi is looking at the possibility of creating a backstop facility for corporate bonds, a mechanism for entities to buy bonds that have no takers and sell them at a later stage.