Seeking a sympathetic ear from the Securities and Exchange Board of India, the mutual fund industry was sorely disappointed on Wednesday, as SEBI chairman CB Bhave instead launched a scathing attack on the MF industry, and even questioned the rationale behind its very existence.
At the sixth edition of the Mutual Fund Summit 2010 organised by the CII in Mumbai, Bhave was critical of the way fund houses do business and reiterated the need for them to focus on investors to grow.
''I have heard about reworking the distribution model, but I think the important thing is to ask what is the rationale for the existence of the mutual fund industry. If you (mutual funds) are producing better returns than what an average investor investing directly in the stock market gets, then why is it that you are unable to convince investors that you are giving them better returns? I mean, are investors so dumb as not to understand that they are getting better returns here (mutual funds) and yet would invest somewhere they would get lesser returns?'' he asked.
He went on to add that there is a gap between what the industry gives and what investors actually want, and the former seems to be reluctant to get into the heart of the matter.
However, Bhave sought to downplay his statement in an interaction with media persons later in the day. ''Don't misread my statement, what I said was that there is room for improvement,'' he said. But his scorching statements were on record.
Bhave's comments came at a time when the sales of equity schemes of mutual funds have been hit after SEBI banned mutual funds from charging investors to pay fees to distributors. It got a further jolt last week when the government clarified that unit-linked insurance products or ULIPs would be governed by Insurance Regulatory and Development Authority.