Mutual Fund industry -- The year that was, and moving on
AuM data for the initial three quarters of 2013 suggests that the year has been sluggish for the mutual fund industry. In fact, notably, during the year, no new licenses were issued, there were no M&A activities and no fresh foreign investment flowed into the sector.
The SEBI had, in the past, taken steps to re-energise the mutual fund industry with continued focus on investor protection. These steps have contributed a sense of stability to the mutual industry, which has been operating in a challenging environment. Going forward, the SEBI could adopt a more stricter approach towards 'non-serious' asset managers. An advisory committee formed to review the net worth requirement for AMCs has suggested an upward revision in the minimum net-worth required for an AMC.
Debt schemes continue to be the flavour of the season. The first Infrastructure Debt Mutual Fund scheme (mutual fund – IDF) was launched in the year 2013. Further, while mutual fund AMCs have shown interest in tapping the pension products market, in the absence of adequate tax incentives, this is yet to take-off. From an asset management industry perspective, the proposal to launch REITs could provide an alternative investment avenue to investors.
While the Government has pro-actively amended the law to resolve taxation issues for mutual fund industry on investment in securitisation trusts, the industry remains circumspect and the amendments have failed to attract investments by mutual funds in securitisation trusts. The industry continues to litigate past tax issues on securitisation trusts.
In a sense, the performance of the mutual fund industry has, to an extent, mirrored the performance of the Indian economy, the stock markets and the FII investment (or divestment) story. With elections on the anvil, an element of 'uncertainty' could prevail for the next quarter or so.
Moving on, the industry looks forward to quick and clear directions on safe harbour for management of offshore funds from India and other similar measures whereby tax can be a facilitator for growth.
Gautam Mehra, leader - Asset Management, PwC India
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