The Securities and Exchange Board of India (SEBI) has constituted a Working Group (Working Group) to examine the existing rules and recommend different eligibility criteria. Private Equity (PE) funds and other non-eligible entities will be allowed to sponsor the fund house as per the eligibility criteria.
SEBI said that the role of the Working Group would be to “recommend mechanisms for redressal of conflict of interest. Conflict of interest may arise when it acts as a sponsor of vehicle/private equity in pooled investments.” Also, these working groups will examine the need to reduce the existing minimum 40 per cent stake of the sponsor in the asset management company and explore the options to be followed in this regard.”
As per the extant rules, any entity holding 40 per cent or more stake in a mutual fund is considered a sponsor and needs to meet the eligibility criteria.
Business Idea: Cucumber business will get rich in summer, know how to start
The regulator has taken this step after IDFC Mutual Fund was acquired by a group of investors led by Bandhan Financial Holding. The group of investors that made the acquisition also includes Singapore Sovereign Wealth Fund GIC and private equity fund ChrysCapital.
Private equity funds have shown interest in entering the Rs 37 lakh crore mutual fund industry. Earlier, global PE players Blackstone and other PE firms were in the race to buy L&T Mutual Fund. However, HSBC Mutual bought it.
“The need for new criteria in addition to the existing eligibility requirements has been felt for sponsoring mutual funds. An alternative set of eligibility criteria may be introduced for new players to act as sponsors,” SEBI said. This is expected to not only boost competition in the mutual fund industry, but also facilitate consolidation in the industry through mergers and acquisitions, which will also benefit the economy.