New fund offers drying up
Mutual fund houses are not filing draft offer documents the first step to launch an NFO as they fear that distributors wont push NFOs without the upfront commission they were enjoying before the Sebi ban on entry load.
By Madhu T, TNN |
MUMBAI: Are the days of mega new fund offers (NFOs) from mutual fund houses over? If you look at the number of draft offer documents posted at the Sebi site in February just one so far, compared with nine in January it may seem so. At least, that is what most mutual fund industry players would love to believe.
They think fund houses are shying away from lining up NFOs mainly because of a comatose distribution network, rendered ineffective after the SEBI abolished entry load on fresh investments in mutual fund in August. Mutual fund houses are not filing draft offer documents the first step to launch an NFO as they fear that distributors wont push NFOs without the upfront commission they were enjoying before the Sebi ban on entry load.
MFs used to pass on the entry load (mostly 2.25%) as commission to agents. However, an agent will have to charge a fee for advice to earn income after the ban on entry load. Some people may say that it is a bit premature to write the obituary of new offerings from funds, but I believe we wont see huge NFOs anymore, says a mutual fund distributor who doesnt want to be named. It is very simple . How can you collect money when nobody is pushing the product . It simply doesnt make sense for anyone to sell a product which earns no commission, he adds.
The entire industry has gone into a shell. Be it the mutual fund industry or banks and distributors selling mutual fund products, everybody is lying low, says Rakesh Goyal, senior vice president , Bonanza Portfolio. Though tax saving schemes are doing well at the moment, the collections are not that impressive, he adds.
What is even more disturbing is that most industry players cant think of a solution to the imbroglio . At the moment, mutual fund agents are not hard-selling MF products because there is no money in them. Most of them seem to be pushing ULIPs at the moment, says the distributor.
Goyal says unless agents find a way to generate revenue from selling MF products, they are unlikely to push them. Probably, they may be able to generate revenue if they can build a large volume of business. Till that time intermediaries are not going to be very enthusiastic about selling MF schemes, he says.
They think fund houses are shying away from lining up NFOs mainly because of a comatose distribution network, rendered ineffective after the SEBI abolished entry load on fresh investments in mutual fund in August. Mutual fund houses are not filing draft offer documents the first step to launch an NFO as they fear that distributors wont push NFOs without the upfront commission they were enjoying before the Sebi ban on entry load.
MFs used to pass on the entry load (mostly 2.25%) as commission to agents. However, an agent will have to charge a fee for advice to earn income after the ban on entry load. Some people may say that it is a bit premature to write the obituary of new offerings from funds, but I believe we wont see huge NFOs anymore, says a mutual fund distributor who doesnt want to be named. It is very simple . How can you collect money when nobody is pushing the product . It simply doesnt make sense for anyone to sell a product which earns no commission, he adds.
The entire industry has gone into a shell. Be it the mutual fund industry or banks and distributors selling mutual fund products, everybody is lying low, says Rakesh Goyal, senior vice president , Bonanza Portfolio. Though tax saving schemes are doing well at the moment, the collections are not that impressive, he adds.
What is even more disturbing is that most industry players cant think of a solution to the imbroglio . At the moment, mutual fund agents are not hard-selling MF products because there is no money in them. Most of them seem to be pushing ULIPs at the moment, says the distributor.
Goyal says unless agents find a way to generate revenue from selling MF products, they are unlikely to push them. Probably, they may be able to generate revenue if they can build a large volume of business. Till that time intermediaries are not going to be very enthusiastic about selling MF schemes, he says.
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