Sundaram Mutual: Increased Minimum Investment in High-risk Equity schemes..!

Sundaram Mutual Fund (MF) has increased the minimum investment in four of its high-risk equity schemes to Rs. 1 lakh from Rs. 5,000 from July 1, 2015 to curb mis-selling & protect retail investors from the high volatility these schemes are prone to.

The equity schemes in which the investment limit was raised include

1. Sundaram Select Thematic Funds - PSU Opportunities,

2. Sundaram Infrastructure Advantage Fund

3. Sundaram Entertainment Opportunities Fund and

4. Sundaram Financial Services Opportunities Fund.

The cumulative assets under management in these schemes is nearly Rs. 980 crore.

Though there will be no change in the existing systematic investment plan and systematic transfer plan, the Fund is considering some measures to protect investors’ interests through this route, as well.

The returns in high-risk schemes are very volatile and distributors recommend these funds to retail investors when they are at their peaks.

When the net asset value dips, retail investors generally panic and cash out of the scheme with heavy losses. Speaking to BL, Mr. Harsha Viji, Managing Director, Sundaram AMC, said the increase in minimum investment limit in high-risk equity schemes is one of the many initiatives the fund house has taken in the last few months to root out mis-selling.

“Our understanding is to cut a cheque of Rs. 1 lakh for investment in high-risk schemes an investor should have at least Rs. 5 lakh to Rs. 10 lakh in his/her bank account. If that is true, then he would be abreast of the risk involved,” he said.

Alerting MF Investors..!

Asked whether the fund house will not lose out its market share with the high entry barrier, Mr. Viji said the fund house is more concerned on investor protection than protecting its market share.

“We have a process where investors in high-risk schemes are called over phone to make them understand the risk involved and ensure that the advisor does not hide any facts, we have now expanded this scheme to all funds,” he said.

Sundaram MF has taken many steps to curb mis-selling even as it has decided not to adopt the 1% cap on upfront commission imposed by the industry body Association of Mutual Funds in India (AMFI) for now.

“We have no problem with AMFI in the upfront commission issue. The question is on the legality and enforceability of the current solution. In fact, we would welcome a SEBI regulation on this issue,” said Viji.

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