Worried mutual fund houses have approached market regulator SEBI after losing around 4 lakh customers in the last three months. And the regulator is reportedly considering remedial actions, including an expanded distribution model for these investment products.
While debt-focused MF schemes, which account for less than 10 per cent of market share, actually witnessed an increase of 2 lakh folios in the last three months, this could not offset the loss of 6 lakh folios in equity-focused MF schemes.
According to information available with the Association of Mutual Funds in India (AMFI), the total number of MF folios stood at 4.79 crore at the end of May 2010 — with 4.07 crore in equity-focused schemes.
This marks a significant decline from 4.83 crore folios — including 4.13 crore in equity-focused schemes — at the end of February, 2010.
Fund houses are worried as the decline in folios has happened in the backdrop of SEBI scrapping the entry load for MF schemes late last year. As a result, distributors have started promoting high-commission products like unit-linked insurance in preference to MFs.
A SEBI official said the regulator is looking at various ways to increase investor participation in MFs, including roping in intermediaries like banks for expanding their reach.