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Sponsor-less AMCs possible in India? SEBI thinks yes; calls for opinions

Mutual fund sponsors might no longer be necessary in a mutual fund’s lifecycle. On the other hand, SEBI has proposed a new breed of sponsors that don’t meet existing stringent criteria, but which comes with deeper pockets.

January 16, 2023 / 11:33 AM IST
From allowing private equity funds to become sponsors, to allowing sponsor-less fund houses or a new breed of sponsors, SEBI mulls reimagining the role of the sponsor in the Indian mutual funds industry

From allowing private equity funds to become sponsors, to allowing sponsor-less fund houses or a new breed of sponsors, SEBI mulls reimagining the role of the sponsor in the Indian mutual funds industry

In what could be one of its most radical decisions since it set up mutual fund guidelines in 1996, the capital market regulator, Securities and Exchange Board of India (SEBI) has proposed to change the role of a mutual fund's sponsor.

On January 13, SEBI floated a consultation paper seeking public opinion on broadly four big items: Whether private equity funds can be allowed become sponsors; whether the existing criteria to set up sponsors should be strengthened; whether new type of sponsors- albeit those that don’t have the traditional net-worth or profitability requirement- can be allowed; and whether sponsors are required at all, for well-established and long-running asset management companies.

A new class of sponsors

SEBI feels that it’s time for Private Equity (PE) funds to enter the Rs 40 trillion Indian Mutual Funds (MF) industry. “The Working Group noted that PE with significant capital can invest in technology, bring in strategic guidance and good talent to fuel growth and innovation and expand the presence of mutual funds including driving inclusive growth. PE may also provide constructive competition to the current entities in the Mutual Fund industry and improve value to investors,” says SEBI in its consultation paper.