One thing that all investors have in common is the need for the safety of their investments. One such instrument that is usually regarded as safe has been facing some serious flack lately. Mutual fund investors have lost over Rs 1 lakh crore in just the last 2-3 years. News of IL&FS, Yes Bank, Vodafone, have all but added to the investor’s woes. RBI’s Rs. 50,000 crores set aside for this is not the solution, it is nothing more than a temporary relief.
Franklin India AMC just unexpectedly wound up 6 high-risk debt funds, this further weakens the confidence of investors and inevitably raises many questions about the investment decisions taken by the mutual fund industry. When an investor is advised to invest in mutual funds, one assurance given buy them is professional management and process-driven investment decisions. With recent events that’s transpired, this is well, questionable to say the least.
As per many experts, they believe that this is Franklin’s problem only. There is a possibility that Franklin India might have taken very high risk compared to others. If these schemes give such negative results, then it will scare away any future investors. There were certain questionable practices like the issue of Ultra Short-Term Bond Fund invested in 5 and 10-year maturity paper. But according to SEBI, these only have a duration of 3-6 months.
If measures are not taken against issues like these, investors will shift their money to insurance and banks. AMC and fund managers’ role have to be investigated. They must be answerable for every default made in their wake and reviews must be made by SEBI.
Another aspect that need to be looked at are the ratings given by money control, value research, etc. as these greatly influence investment decisions. So, they should be brought under the scrutiny of some guidelines or laws so that the ratings aren’t manipulated. Loss in debt is permanent but it could be recovered through equity if it was a good stock or fund.
More often than not, debt investment is much riskier than equity investment. Thus, SEBI should come up with strict guidelines so as to protect investors’ interest. Investments are what drives the economy, if not treated right, then it would lead to some major setbacks that could have been easily avoided. Damage done by the lockdown can’t be estimated with certainty, hence it’d be better if SEBI took some precautionary methods rather than finding a solution after the damage has been done.
