There is some attention focused on debt funds in the mutual fund industry, thanks to JP Morgan screwing up investor money in bad paper like Amtek.
The industry has so many check for the investor who comes in- Multiple layers of KYC, repeated submission of forms, filling up papers in a particular colour only etc., submitting information about what the investor income profile is, where are the scars in the body etc.
Similarly, they have exams and tests for people who can sell mutual funds. SEBI has created a fee pipeline by making registration of intermediaries, license to amcs, turnover fees etc.
However, they have no gatekeeping when it comes to appointing fund managers. My driver can be the fund manager! He does not need any qualification at all. Our bond markets have several telephone operators who are called ‘dealers’. They take short term view on bond prices and churn a portfolio several times a day. They need not have any qualifications apart from a good rapport with the big bond market players. When these kind of guys become “Fund Managers” in debt funds of mutual funds, you know what the industry is all about. For them, there is no difference between an Amtek or a HUL.
SEBI, basically says that if there is a public bus service, the conductor, the bus owner and the passengers need a license. Anyone can be a driver in the bus.
BalaBlogs 
True Bala.
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Unfortunately, a driver may use his better judgement to produce more risk-adjusted rewards for shareholders than a highly educated Fund Manager. We have scores of examples where a well educated person has not created more educated decisions in the business of stock (or bond) picking. Hubris, bigotry and a flagrant lack of fiduciary duty cause the conversion of a sound investing mind into a reckless trading mind.
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How sad it is. Should the watchdog wake up now at least. It is really a pity that there is no qualification for a “Fund Manager”.
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The other issue is to rather restrict the amount that a scheme can handle (may be 2K Cr seems huge) they let the scheme get too big.
10K+ Cr for few HDFC MF Schemes, seems enormous as there are not too many places to deploy that sort of money in Indian market. But as the Scheme has performed from past 10+ years and investors will keep on pouring money in, as MF Agent will keep on showing the numbers to the small investor to prove the point (what has worked in past will, history repeats itself !) till the future numbers does not match.
The SEBI’s gimmick of allowing every fund house to launch unlimited NFO with 3 to 5 year lock in at the time of peak is another funny thing i have seen in past. As the investor sentiment is high (even my dog can be making money due to liquidity), there should be restrictions on fund houses and amount of schemes they can come out with.
Having not seen many launches on Pharma and FMCG schemes in market 5 to 6, compared to 100’s off Infra themed scheme, PSU themed, I wonder how a little guy would be really able to make any significant money… Not talking about wealth, that’s just a distant dream. (This can only be done in this schemes if you are the fund manager as to no matter what unit holder you can get 3% of the AUM! I don’t understand how can SEBI allows 2-3% as fees)
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