May 16, 2012

Politics in AMFI?

Recently AMFI (Association of Mutual Funds in India), the industry association body of asset management companies in India, was in news over politics between clashes amongst its small/new players and the bigger/established ones.
The matter was related to the proposal that AMFI, allegedly was to make to SEBI, to tell it to form rules abolishing/banning upfront commission by fund houses to its agents.
Fund houses, especially the smaller and newer (among many others) are paying between 1-3% commission from their own pocket to increase investors and their AUM (Asset Under Management- the value of total investment in all schemes with the fund house/amc)

These smaller fund houses/AMCs complaint that the AMFI was acting in favour of the bigger and established players, who can sustain without paying upfront commission to agents as they have established agent network and huge AUM sizes. Persons familiar with developments also said that these smaller AMCs warned AMFI of disassociating themselves from AMFI and forming parallel association. To tackle issue, it is said that AMFI has replied that if SEBI arbitrarily comes up with norms similar norms then they will not be able to help. An indeed diplomatic step suggesting association politics. The smaller fund houses manages 500 to 5000 crore rupees AUMs while the bigger funds have bigger AUMs.

There are 44 registered AMCs which all are members of AMFI. It is noticeable and worrisome that at a time when declining AUMs (down close to 20% at below 6 lakh crore from above 7 lakh crore in less than 3 years) and number of mutual fund investor folios, the industry should in fact unite to bring in more inventives for agents and investors alike to increase participation of common population in Indian equity markets; and not do internal politics.


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