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What are your views on SEBI's new rule for fund-manager compensation?

While the new SEBI regulation is right in principle, it has certain drawbacks as well, says Dhirendra Kumar

What are your views on the recent circular regarding Mutual Fund manager's compensation? Also, Mirae Asset Mutual Fund has reduced brokerage for two of its funds. What are your views on that?
- Ashish

The SEBI regulation is right in principle but it might be very clumsy in execution. While there is no doubt that the fund manager's interest being aligned to investor's interest is an excellent idea, but how will it be executed and will it be able to achieve its goal by forcing the fund manager to invest 20 per cent of his income into the fund, shall be an appropriate thing from the fund manager's view, I have my doubt. Moreover, this comes with a three-year lock-in period.

Coming to the reduction in brokerage by Mirae Asset Mutual Funds for two of its funds. Reduction of brokerage by fund companies reduces the cost of investors in the regular plans. As more and more investors are becoming aware of the direct plans, if the difference between the direct and the regular plan is very high, the whole revenue will be at risk. So I think it is a wise thing that is done by the AMC.

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