Difficulties are a part of everyone’s life. Some people try and avoid difficulties in one way or the other while the brave ones face the difficulty head-on in order to over the same. The stance adopted by the brave ones help them to taste success in the long run while those who try and escape difficulties never achieve anything remarkable in their life. The noteworthy aspect of a brave individual’s life is the ways and means adopted by the individual to overcome the challenges and difficulties placed by life before him or her.

Similarly, the mutual fund industry too, is going through a rough patch (rather a long one), since the entry load ban in August 2009. Various Asset Management Companies (AMCs) have adopted different means to cope up with the difficult times. Some have shut shop and merged with their counterparts, some have embarked on a different cost-revenue model while some have carried on with their distributor free model. But despite different measures undertaken by different AMCs, there is struggle for attracting more and more investors to the mutual fund industry.

Citing the above teething troubles for the mutual fund industry, the capital market regulator – Securities and Exchange Board of India (SEBI) has proposed a few long-term measures, which in the view of SEBI will help revive the fortunes of the mutual fund industry. Some of the measures proposed by the SEBI are as follows:
 

• Tax structure to attract long term investors
• Lowering of taxes and stamp duties
• Incentives for selling mutual fund schemes in tier II or III cities
• Disincentives to stop the phenomenon called churning or frequent switching of schemes by distributors and fund houses
• Higher minimum capitalisation norms to have serious players in the asset management business
• A comprehensive mutual fund policy to be drawn by the Government
   

We are of the view that, the mutual fund industry which constitutes about 8% of the country’s GDP has an immense potential for further growth. However, for growth to take-off there needs to be robust platform to encourage long-term investment habit amongst investors. Also, one of the most important aspects is to impart adequate education amongst the masses about the advantages of mutual fund investing. At present lack of awareness is acting as a major hurdle for the mutual fund industry to grow at faster pace.

The measures envisaged by SEBI if implemented in the right spirit may help revive the fortunes of the mutual fund industry. But since the mutual funds remain a push product, a robust cost structure is imperative for the growth of the industry. We also think a fee based model should be encouraged as it would be beneficial to both the investors as well as the distributors. Moreover, to turn mutual fund investments from a push product to a pull product, educating the masses is the only way out.
 

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Comments
mmmittal@hotmail.com Aug 06, 2012 Please read this article by Debasish Basus in Business Standard today on the subject of investor education - quite an illuminating one. Emphasis on investor education is only to hide regulatory failures, nothing more.
arv746@yahoo.com Aug 06, 2012 SEBI needs to revive mutual fund industry, to keep alive equity market.  Common people - middle class people do not risk themselves entering equity market. Mutual fund investment should be made much more attractive than equity market. It should be made very friendly with lowest class of people like vegetable vendors, milk suppliers, and other low income group people. This will infuse money into market, giving good return to all.
paramesha@yahoo.co.in Aug 06, 2012 As return from Mutual funds in last three years is either negative or very very minimal, investors are frustrating to invest even in SIP.  Government / SEBI take care of investors funds especially on equity / balance funds
sm.iriventi@gmail.com Aug 15, 2012 While taking these desitions, the SEBI should keep in mind that the retail investors are not as organized as the MF Schemes selling community. This community represents their difficulties and may get reprive through favorable decision from SEBI. Where as the hapless retail investor as such is not having any direct say in the ongoing 'revitalisation process' of MF industry. The AMFI should keep the retail investors' interest in consideration while proposing any change in existing guidelines. Simply bringing back the entry loads and distributors' commissions as they were earlier, would act against the interest of the small investors, who is already facing prolonged under performing equity markets. The proposed online platform as mooted by AMFI shpild be made functional as soon as possible, this will go a long way in spreading the investment culture in smaller cities and towns and aid to investors' interests.

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