Sebi’s Advisory Committee On Mutual Funds To Discuss Proliferation Of Thematic Fund Launches, Says Report

The Securities Exchange Board of India’s (Sebi) Advisory Committee on Mutual Funds is slated to meet on February 24. The committee is expected to discuss several issues, including deliberations on the high number of thematic fund launches made by mutual fund firms.

Presently the Sebi allows fund houses to launch one scheme within the 36 broad categories of schemes laid down by the Sebi. Notably fund houses are only allowed to launch an infinite number of schemes in the thematic category.

A report by Moneycontrol which cited people privy to the development said that the infinite number of launches has become a key issue. The Sebi believes that the “proliferation” of thematic funds is being undertaken to launch more New Fund Offers (NFOs). Additionally, there is not much difference between the new thematic fund and the existing fund of the fund house.

AMCs are also able to offer higher commissions to distributors through NFOs than existing schemes. Presently some of the key AMCs in India have over 100 schemes on offer.The report added that one of the views within Sebi is that a threshold should be put in place to stop fund houses from offering similar schemes under the guise of offering a new theme to investors.

“SEBI is of the view that if there is more than 60 per cent portfolio overlap between and an existing scheme and a proposed thematic fund, then such funds should not be allowed to launch,” the report said.

Earlier on February 21, the Association of Mutual Funds in India  (AMFI) announced the launch of three new features aimed at helping investors. Notably these features include the sachetisation of SIPs, Tarun Yojana and the (Mutual Fund Investment Tracing and Retrieval Assistant).

Speaking at the event Sebi chairperson Madhabi Puri Buch also addressed the issue and said that the market regulator is also trying to address the issue and does not believe in just capping the number of thematic funds.

"We understood the new fund offering (NFO) problem, so we addressed it. We would be very keen to understand (if there are further issues). Amfi has always been collaborative, and I would say that it should come and guide us on this," said the Sebi chief.