MFs crack ad code with awards

Funds Find New Benchmark In The Face Of Sebi’s Ban On Misleading Campaigns

FUND houses think smart. Now, they advertise smarter. Thanks to the various mutual fund awards these days endorsed by ‘credible’ third-party rating agencies such as CRISIL, ICRA and Lipper, the 30-odd asset management companies (AMCs) of the country seem to have found succour at last. The relief to the fund houses comes after the vice-like grip on advertising the Securities and Exchange Board of India (SEBI) regulations since they were framed more than a decade ago. With awards linked to three premier credit rating agencies, over the last few years, AMCs have begun to feel secure on their Rs 200-crore ad turf. SEBI’s advertising code for mutual funds (MFs) bars AMCs from making a statement, promise or forecast, which is not true or is misleading. Apart from several checks and balances that summed up what was ‘misleading’, fund houses were not even allowed to bring in celebrities to advertise their schemes. “As investments become more sophisticated, ratings help in imparting a direction to the advisor/retail investor and the awards just help in defining the research process,” points out OptiMix India (a division of ING Investment) chief marketing officer Sumeet Vaid. Even Association of Mutual Funds in India (AMFI) chairman AP Kurien feels that going forward, the awards could become a benchmark of sorts in mutual fund advertising. “These awards are instituted by third-party agencies adding excellent credibility. While CRISIL is owned by S&P, ICRA and Lipper are also owned by global players. So while providing ratings, they don’t just take into account the performance of the scheme, but also volatility as measured by the sharp ratio,” he explains. Being foreign-owned, the rating agencies adhere to world-class standards and due diligence, thus setting new benchmarks within the universe of mutual funds. In the absence of further ad avenues, while some players like Reliance ADAG and ICICI are literally painting the town red with award ads, others such as TATA Mutual Fund are more circumspect. “Since the category is high-performance dominated, funds tend to communicate better with awards. Our funds have also won awards in the past, but we haven’t advertised so aggressively,” says TATA MF CEO VP Chaturvedi. But is more always merrier? Today, there are 30 fund houses and three awards to celebrate performance. As investments get complex and fund houses multiply, more awards may come into play. That can well lead to chaos and disorder. It could confuse both the advisors and the retail investors further in choosing the right fund. Imagine every fund under the sky advertising with an award to boot! “Mutual funds are usually looking at third-party endorsement to advertise. But if it gets to a dirty level where the player has a hand in creating the awards, it’ll get really nasty,” warns Principal MF business head Rajan Krishnan. “When more awards come in, SEBI would also be worried,” Mr Kurien backs up the argument. The combined assets under management (AUM) of all fund houses aggregated to Rs 3,26,328 crore as on March 31. With AUM expected to cross the Rs 6,00,000 crore-mark by 2010, new rules in fund advertising may come into being. While a plethora of award-driven ads seems dangerous, what we have today looks more manageable.

Courtesy: EconomicTimes