Edelweiss Asset Management feels the new Sebi 'skin-in-the-game' circular is going to be big challenge to implement.
Radhika Gupta, Chief Executive Officer, Edelweiss Asset Management in a tweet said the circular applies to not just senior employees but junior research staff, dealers and support function heads. These people do not even earn the kind of money like the CEOs and CIOs, she said.
It is forcing these people to lock 20 per cent of their income for three years and mandates how much one saves.
"For a guy earning ₹15-20 lakh (per annum), imagine how difficult it is to put away ₹3-4 lakh. We are constraining employee cash flows," she said.
The circular suggests mutual funds have to invest in all schemes basis weighted AUM.
"If I run a 80-20 debt-equity business that is my forced asset allocation. For a mid-cap fund manager, he has to invest in his schemes or a higher risk grade," she said.
Just because a fund manger manages a mid-cap fund, it does not mean that it is his risk appetite! And a liquid fund manager has to park money in liquid for three years, said Radhika.
"For a CEO or sales head, I have to invest in every scheme of my AMC? Every single scheme? That’s going to be very difficult," she said.
She said these kinds of rules do not apply to employees of banks, insurance companies and other financial institutions. “Why these rules for one industry?”
To implement the circular, mutual funds will be forced to pay everyone 20 per cent more hitting the business and cost structure.
Finding talent in the mutual fund industry will become that difficult with the marketing head and CTO, who are not even involved investment decisions, forced to park 20 per cent of the pay for 3 years, she said.
Moreover, Radhika said how can fund houses decide on variable pay compensation at the start of the year when it depends on employees performance in that year.
"If we wanted to build skin-in-the-game, a simple rule would be to make people earning over Rs 50 lakh to invest about 50 per cent of your investments in the funds they float," she said.