MUMBAI: Sebi chairman Tuhin Kanta Pandey, while appreciating the mutual fund industry’s role in channelling savings into the market, cautioned fund houses against excessive exposure to microcaps and certain debt instruments.
He stressed that beyond investment risks, firms must also guard against operational lapses that could undermine investor confidence.
Pandey said the true benchmark for funds was not assets under management alone but the trust and stewardship of public money.
Complimenting the industry on its three decades of growth, he reminded them of their core responsibility: “Amidst this exciting future, let us remember that our true benchmark is not just AUM, but trust and management. I urge you to innovate responsibly, balance creativity with caution, grow inclusively, reach investors in every village, town, and city, and uphold trust relentlessly.”
Speaking at an event marking 30 years of the Association of Mutual Funds in India (Amfi), Pandey said: “While there is a need to diversify beyond blue-chips, mutual funds, as a retail product, should exercise caution while investing in microcaps or debt papers through bespoke deals. Maintaining proper documentation for such investment decisions ensures transparency and sound due diligence.”
He also urged the industry to ensure no preferential treatment is given to any class of investors during subscriptions or redemptions. “By strictly adhering to the cut-off time for all classes of unitholders, the industry can instil a greater degree of confidence among investors,” he said.
Highlighting operational risks, Pandey cited fraudulent redemptions by impersonators as a growing threat. “As fraudsters grow more creative, we must remain vigilant,” he said, adding that asset managers must act swiftly when such cases are detected and share emerging patterns across fund houses and registrars. “In this battle, speed of information is our greatest weapon,” he emphasised.
On technology, Pandey said the increasing reliance on digital platforms brought vulnerabilities. “As more investors interact digitally, even a single breach can cause lasting damage to investor confidence.” He underlined that data privacy must be treated on par with safeguarding investor funds: “Protecting customer data is as important as protecting their money. It must be a top priority for mutual funds.”
On outsourcing, he said while it has improved efficiency, it does not reduce accountability. “Mutual funds remain fully responsible for the actions of their vendors and partners. Fund houses’ agreements with vendors or third parties must ensure there is no scope for data leakage,” he said.
He concluded: “Mutual funds are not just financial products; they are enablers of aspiration, bridges to opportunity. Today, as a reaffirmation of our collective mission, let us make mutual funds not just the right choice, but the default choice, depending on varying risk appetites and financial goals.”