The latest round of promotions by HDFC Mutual Fund and Franklin Templeton Asset Management has prompted speculation among competitors and financial advisors that these companies may be using investors' funds to boost their brand .
The multi-crore campaigns by these funds, though are not illegal, have raised ethical issues when the regulator has been working to cut costs for investors, including banning of entry loads. All mutual fund schemes' advertisements go through the Securities & Exchange Board of India (Sebi) before going public.
Billboards and signs at traffic lights across Mumbai and Delhi that have sprung up display the companies prominently instead of individual funds which normally is the case. One such advertisement reads — 'choose a healthy investment-HDFC Mutual Fund SIP'. The other — 'Invest in Franklin Templeton Mutual Fund'. At the bottom of the boards, one of their funds' name is written in a small font, the corpus from which possibly the cost of promotion is met.
"Fund houses could be paying for such advertisements from fund accounts," said Dhirendra Kumar, chief executive at MF tracker Value Research.
"Older schemes have residual funds collected from entry and exit loads which need not be routed back to the NAV of respective funds. Fund houses use residual money to promote the fund under which the money is collected. In this case, I feel, residual money has gone into promoting fund houses," he said.
"The campaign is not to promote the fund house," said a HDFC Mutual Fund spokesperson. "It is carried out to promote investments in our four schemes through SIP. We aim to reach out to investors with a message of adapting a disciplined approach to equity investment through SIP as a preferred option."
Franklin Templeton and Sebi did not respond to queries seeking their views. Asset management companies (AMCs) are struggling with slumping subscriptions to their equity schemes, after the regulator banned entry loads on funds which it believed was unjustified. Ever since, mutual funds have been working ways to promote schemes and draw investors.
This probably may be one of the ways to attract investor attention. While HDFC MF has named its 'Capital Builder Fund', 'Growth Fund' and 'Core and Satellite Fund' on the billboard, Franklin Templeton has highlighted its 'India opportunities fund', among others.
"From what it seems, both fund houses are on the right side of the law, but they have not carried out their ad campaigns in the right spirit,'' said Ashutosh Wakhare , head trainer at Moneybee Institute, which trains investment advisors. "Fund houses should promote themselves using their own money."
This is not the first time that mutual fund advertisements have come under an ethical debate. In 2008, after receiving complaints from some investor organisations, Sebi had asked AMCs to reduce the speed at which the 'investment disclaimer' is read out in television advertisements.
Source: http://economictimes.indiatimes.com/personal-finance/hdfc-mutual-franklin-accused-of-using-client-funds-to-promote-brand/articleshow/7233403.cms
The multi-crore campaigns by these funds, though are not illegal, have raised ethical issues when the regulator has been working to cut costs for investors, including banning of entry loads. All mutual fund schemes' advertisements go through the Securities & Exchange Board of India (Sebi) before going public.
Billboards and signs at traffic lights across Mumbai and Delhi that have sprung up display the companies prominently instead of individual funds which normally is the case. One such advertisement reads — 'choose a healthy investment-HDFC Mutual Fund SIP'. The other — 'Invest in Franklin Templeton Mutual Fund'. At the bottom of the boards, one of their funds' name is written in a small font, the corpus from which possibly the cost of promotion is met.
"Fund houses could be paying for such advertisements from fund accounts," said Dhirendra Kumar, chief executive at MF tracker Value Research.
"Older schemes have residual funds collected from entry and exit loads which need not be routed back to the NAV of respective funds. Fund houses use residual money to promote the fund under which the money is collected. In this case, I feel, residual money has gone into promoting fund houses," he said.
"The campaign is not to promote the fund house," said a HDFC Mutual Fund spokesperson. "It is carried out to promote investments in our four schemes through SIP. We aim to reach out to investors with a message of adapting a disciplined approach to equity investment through SIP as a preferred option."
Franklin Templeton and Sebi did not respond to queries seeking their views. Asset management companies (AMCs) are struggling with slumping subscriptions to their equity schemes, after the regulator banned entry loads on funds which it believed was unjustified. Ever since, mutual funds have been working ways to promote schemes and draw investors.
This probably may be one of the ways to attract investor attention. While HDFC MF has named its 'Capital Builder Fund', 'Growth Fund' and 'Core and Satellite Fund' on the billboard, Franklin Templeton has highlighted its 'India opportunities fund', among others.
"From what it seems, both fund houses are on the right side of the law, but they have not carried out their ad campaigns in the right spirit,'' said Ashutosh Wakhare , head trainer at Moneybee Institute, which trains investment advisors. "Fund houses should promote themselves using their own money."
This is not the first time that mutual fund advertisements have come under an ethical debate. In 2008, after receiving complaints from some investor organisations, Sebi had asked AMCs to reduce the speed at which the 'investment disclaimer' is read out in television advertisements.
Source: http://economictimes.indiatimes.com/personal-finance/hdfc-mutual-franklin-accused-of-using-client-funds-to-promote-brand/articleshow/7233403.cms
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