1/n Covid has brought out some attributes of AMCs - that need contemplation and change.
Every AMC needs to go back to the drawing board to see which of their funds are fit to be open ended. Rest need to be closed ended or should simply not exist.

2/n No point curtailing flows, no point opening up suddenly, no point suspending inflows, no point closing down and no point hiving off a part of NAV in the name of seggregation.

3/n What is the essence of being an open-ended fund then? How does this help the cause of a retail investor wanting to steadily invest for the long term?

4/n There have been a trail of such occurrences, especially in the last few years, and starting well before Covid. Examples:

5/n Eg.1: Small cap fund flows were restricted suddenly when fund managers felt they couldn’t handle it and then opened up when they were comfortable.

6/n Eg.2: Funds that felt they were ‘preserving value’ for existing investors, suspended inflows when they expected bad debt to turn good.

7/n Eg.3: Fund houses were asked to do ‘seggregation’ in the name of protecting investor value.

Eg. 4: Funds that simply couldn’t manage redemption just decided to close down.

8/n The effect of all these? The fundamental structure of mutual funds become unreliable and unpredictable.

9/n Only way to avoid this is if for AMCs to have fewer funds that can be relied on structurally at ALL TIMES. A fund that cannot be run sustainably as an open-ended fund should not be run as one!

10/10 And any restrictive practices adopted by AMCs should be penalized by the regulator. Only then can MFs become reliable as long-term investments for a retail investor - which is the primary selling mantra of the industry!