T.C. Nair in Calcutta on Friday. A Telegraph picture

Calcutta, Aug. 10: Assets managed by mutual funds are growing too fast for Sebi’s comfort. The market regulator has, therefore, called for a review of the three-tier structure of fund houses.

“It’s astonishing that assets managed by mutual funds have doubled in less than 18 months. Since the markets are changing very fast, mutual funds should provide adequate risk assessment and management systems. As fund houses are witnessing rapid growth in assets, a review of their current organisational structure is necessary,” whole-time Sebi member T. C. Nair said on the sidelines of a seminar on mutual funds here today.

Total AUM of mutual funds increased to Rs 4,86,651 crore by the end of July this year from Rs 2,30,921 crore in March 2006. “In July alone, the AUM has grown by nearly Rs 1,00,00 crore,” Nair said.

“Sebi thinks the mutual fund industry is still very urban and geared towards institutional investors. While 81 per cent of the total AUM comes from eight cities, about 49 per cent belongs to corporate clients, banks and financial institutions,” he added.

The Unit Trust of India was the first mutual fund in the country, formed as a trust in 1963. In 1987, other public sector entities, particularly banks and insurance companies, were allowed to set up mutual funds. Private sector firms were allowed to enter the industry in 1992.

“To keep away everybody from entering the business, the government followed the three-tier organisational structure — sponsors, trustees and asset management company. The 20-year-old structure is still being followed. This needs to be reviewed to ascertain whether we should look at some other models,” said A. P. Kurian, chairman of the Association of Mutual Funds in India.

“In the US, mutual funds are corporate entities, while in the UK they operate under the supervision of a central, professionally managed trust.”