Wednesday, July 9, 2014

Who has got it wrong -- SEBI or the Journalist?

Business Standard published a news article where it informs that SEBI has sent notice to 20 AMCs, for parking undeployed funds in short term debt instruments.

"By Sebi norms, an AMC cannot park funds in short-term deposits of banks in excess of 15 per cent of net assets of the scheme. The investment could be raised up to 20 per cent but only after the approval of trustees." -- Business Standard 

Now I think there is a serious problem with this news. Perhaps it is correct or maybe SEBI needs to do a bit of homework. Each fund has a strategy. Anyone who has been reading market history or has had the chance to see it will know that no strategy works all the time.

At one point in time, the fund manager will not able to find good ideas to invest in because of the strategy or the philosophy is not suitable for that market condition. In such times the choice for the fund manager would be limited. Either they can keep the money in some safe, liquid deposit or take risk beyond their comfort level. Therefore, this notice from SEBI’s does question their wisdom or the reporting standard?

I don’t know what to think! Perhaps the SEBI.

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