SEBI’s New Rules On Mutual Funds To Usher Transparency, Say Money Managers
An employee checks the glass inspection door. (Photographer: Tomohiro Ohsumi/Bloomberg)

SEBI’s New Rules On Mutual Funds To Usher Transparency, Say Money Managers

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The new, stricter norms approved by the Securities and Exchange Board of India on investments in mutual funds is a healthy approach to bring transparency, according to fund managers.

“It’s a set of rules that definitely does two things—make liquid funds more liquid and bring a lot of tightness into the credit fund framework,” Radhika Gupta, chief executive officer of Edelweiss Mutual Fund, told BloombergQuint in an interaction. She said the regulations have been “thought through” and would provide structural stability to the industry.

Gupta noted that as the industry develops, it’s important to take “baby steps and not go too wrong”. The opportunity, she said, doesn’t lie in doing complex things, but in moving the banking base and bringing tax in favour.

What appears unhealthy in the short term, sometime has a long-term good.
Radhika Gupta, CEO, Edelweiss Mutual Fund

Watch the complete conversation with Radhika Gupta and Sunil Subramaniam here:

Also read: SEBI Board Meeting: SEBI Imposes Curbs On Mutual Funds’ Investments In Debt Securities

Other industry executives agreed.

Gupta, along with Sunil Subramaniam, managing director of Sundaram Asset Management Co. Ltd.; and Lakshmi Iyer, chief investment officer for debt, Kotak Mahindra Asset Management Co.; agreed that certain aspects of the new mandate would restrict investment options, but said it wouldn’t be cause of worry.

“It’s not going to make any significant impact in terms of the flexibility to the fund manager or returns to investor,” Subramaniam said.

“As we are trying to increase the debt penetration, the more the emphasis is on safety or liquidity of the funds for marketing and less the emphasis on taking exotic structures to deliver yields without knowing the risks involved in those structures, is a healthy move,” he said.

“If you announce something in a greater fashion and give time to the industry to adjust itself, it’s not a bad thing,” Iyer said, adding that the new norms wouldn’t sound a death knell for the industry.

Also read: Tougher Rules For Mutual Funds Mean Volatile Returns, Higher Safety

Watch the complete conversation with Lakhmi Iyer here:

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