Reliance MF says group investments at 3.2 per cent of AUM

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In a first-of-its-kind disclosure in Indian mutual fund space, Reliance Capital Asset Management (RCAM) on Thursday said investment of group companies in its schemes stood at Rs. 3,274 crore, accounting for 3.2 per cent of the fund house’s total average assets under management (AUM).

The fund houses have so far not been disclosing the exact amount of investments by their group companies in their respective schemes, but industry estimates suggest that such investments vary from as low as 3 per cent to as high as 20 per cent for different AMCs.

Reliance Mutual Fund’s proactive disclosure could force other fund houses as well to make such disclosures, while experts are of the opinion that market regulator Securities and Exchange Board of India (Sebi) and the Association of Mutual Funds in India (AMFI), an industry body, should also initiate steps to make such disclosures mandatory.

RCAM is part of Anil Ambani-led Reliance Group’s financial services arm, Reliance Capital. In terms of average AUM, it is currently the second largest after HDFC Mutual Fund (Rs. 1.06 lakh crore) among 44 fund houses operating in the country, who together manage assets worth over Rs. 8.5 lakh crore.

However, the rankings may change if group investments are excluded from the AUM, as many large fund houses have significant chunk of investments coming from their group entities.

“As the biggest asset manager in the country, we feel it is our responsibility to take disclosures in the mutual fund industry to the next level,” RCAM chief executive Sundeep Sikka said.

In a statement, RCAM said it has decided to voluntarily disclose total investments made by group companies in its total mutual fund average AUM and such disclosures would be made every quarter now onwards.

“As of December 31, 2013, the investment of group companies stood at Rs. 3,274 crore (USD 528 million) and accounted for 3.2 per cent of the total mutual fund AAUM of Rs. 1,02,487 crore (USD 16.5 billion),” the fund house said.

With this, RCAM has become the first AMC to make disclosures in public domain of total investments by group companies in its mutual funds.

Disclosing the details of total investment by group companies will help the investor get a better view of the fund house and enable greater transparency, Mr Sikka said.

“We hope the other players in the industry will also makes this voluntary disclosure in the larger interest of the investors,” he added.

Investments from group companies include investments made by sponsor and holding company Reliance Capital Limited, Reliance Group Affiliate Companies, subsidiaries and businesses including insurance, securities, power, infrastructure and communications & media.

“The size of the AAUM is one of the important criteria’s, which helps the Investors in taking an informed decision for investing in Mutual Funds. We need to help these investors by building their confidence with all such disclosures that can enhance their trust in the industry,” Mr Sikka added.