That the stock exchange platforms enabling investors to buy and sell mutual funds have been non-starters has been well documented before, and with evidence. But perhaps the validation doesn’t get bigger than this. A year after abandoning its plan, the Association of Mutual Funds in India (Amfi), mutual fund (MF) lobby, has gone back to the drawing board to start its own platform, MF Utility. Amfi plans to start the portal by the first week of April 2012. The plan was abandoned long back when the capital markets regulator, Securities and Exchange Board of India (Sebi), in 2009 allowed funds to be traded on the stock exchanges just when Amfi was planning a similar platform.
In a nutshell, the platform will aim at enabling buying and selling MFs more efficiently—whether through agent or direct investment with the fund house—and also bring the costs down.
How will it work?
MF Utility will be available in the form of a website. If you wish to invest directly with a fund house, you need to have an Internet connection. Though the broad contours are still being worked out, officials close to the development say that you will need to open an account, acquire an username and password, register your bank account and start buying and selling funds. Transactions are expected to be as simple as transacting on MF portals where you select fund houses and schemes, specify investment amount and then money moves out from your bank account.
MF Utility is also expected to empanel distributors who will then route their clients’ purchases and sales through the facility. “Agents will be allowed to open an account on MF Utility and then transact from therein. As a result, they can accept application till as late a few minutes before 3pm and not worry about having to travel to the registrar and transfer (R&T) agent’s office,” says V. Ramesh, deputy chief executive of Amfi. Further, MF Utility will give you an option to hold units in dematerialized form as well as physical account statements.
What’s in it for you?
Investing through one cheque and filling in one form will most likely be the portal’s biggest advantage. It’s unclear as to how this benefit will percolate down to those who invest through distributors since it’ll be the distributors who will punch in the orders. However, industry sources claim that investors will not be required to fill up lengthy forms. “Instead of dealing with 45 mutual fund houses or five R&Ts separately, distributors will deal with just one entity (MF Utility). It’ll give an infrastructure boost to the industry,” says Rajesh Krishnamoorthy, managing director of iFast Financial India Pvt. Ltd.
“MF Utility will also enable distributors to cull out consolidated account statements regularly for their clients,”says Akshay Gupta, managing director and chief executive of Peerless Funds Management Co. Ltd.
MF Utility’s biggest usage is expected to come from MF agents who will be empanelled and taken into fold. At present, most agents have not been able to empanel with stock brokers to be able to make use of the stock exchange platforms. With stock brokers not inclined to sell MFs to their clients (less than 0.01% of the total inflows into MF schemes come through stock exchanges), here’s one platform that agents, and their clients, are expected to warm up to.