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Sep 02, 2012, 10.13 AM IST
It is no hidden fact that the mutual fund industry is going through a difficult phase and recent resignations by CEOs of key mutual funds have added fuel to the fire. Fund houses are being forced to resize and restructure its operations, reports Mitra Joshi.
It is no hidden fact that the mutual fund industry is going through a difficult phase and recent resignations by CEOs of key mutual funds have added fuel to the fire. Fund houses are being forced to resize and restructure its operations, reports CNBC-TV18 Mitra Joshi.
There is no end to woes for the mutual industry which has been struggling due to low retail participation, redemption in equity funds, regulatory pressure and distribution processes. The industry has a new headache.
Three CEOs have put in their papers within a span of one week and these include the CEOs of Baroda Pioneer, Daiwa and Mirae Asset
Akshay Gupta, managing director and chief executive officer, Peerless Mutual Fund said, “There have been certain news in the recent history of a sell-out and obviously of a few management changes at the top. There is some right sizing happening. People who are performers are being given rewards and people who are not able to perform consistently are being counseled and being shown the door.”
Industry sources say some fund houses are being forced to lay off almost 30-40% of their staff to cope with high costs.
Jimmy Patel, CEO, Quantum Mutual Fund said, “Once costs go up, you don't have a choice but to restructure, markets is not supportive and asset under management does not come. Obviously, it's the mid-management and sales team that faces the axe.”
Fund houses are also feeling the pressure of AMFI’s proposal to ban upfront commission for distributors.
“The approach of removal, banning or completely doing away with a particular practice, trying to play on the profit and loss of the asset management companies (AMC) is not the right way of doing it.” said Gupta.
Industry experts say the focus on asset under management expansion has come at the cost or profitability in the last three years. Shareholders are now unwilling to infuse capital and hence businesses are being restructure, resize and focus on the bottmline.
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