By R Jagannathan
If it ain’t going to be my brother, a plague on your house.
This seems to be the underlying message coming through from the finance ministry, which has managed to keep UTI Mutual Fund, once upon a time the biggest fund in the country, headless and clueless for all of 15 months.
In February 2011, the fund’s Chairman UK Sinha left to head Sebi, the market regulator. Since then Pranab Mukherjee’s all-powerful adviser, Omita Paul, is said to have been pushing the candidature of her brother Jitesh Khosla – an idea that has not found favour with either the fund’s strategic investor, T Rowe Price (26 percent stake), or even the public sector shareholders (LIC, GIC, SBI and Bank of Baroda).
In this stalemate, the fund has suffered, with assets under management falling by 10 percent since the time Sinha left.
So what should the fund do? Appoint a boss immediately?
Not quite. What it has opted to do is to axe the Chief Marketing Officer (CMO) Jaideep Bhattacharya, says The Economic Times. The newspaper quotes unnamed sources as saying that the board has sought Bhattacharya’s resignation as the trustees have been anxiously asking about the fund’s falling assets. It is now No 5 in the assets pecking order, and slipping.
If this report is true, it means that the board, instead of fixing the problem, has opted to fix the blame for poor performance by locating a scapegoat. There’s no CEO to fire, so the CMO will do.
The fund’s assets under management (around Rs 59,000 crore as at the end of March 2012) have been falling in part because it has not been able to launch new schemes.
And it had not been able to launch schemes not because the CMO was incompetent, but because the fund did not have a CEO: Sebi rules do not allow a headless mutual fund to launch fixed income plans – which have been the flavour of the season, with equity having gone out of fashion for a while.
Pushed to the wall – on one side by Sebi and on the other by an intransigent finance ministry – the UTI board opted to appoint an interim CEO in January. Imtaiyazur Rahman, earlier part of the four-member ad hoc committee set up to run the fund, is now to interim CEO.
Though no one will say it officially, there is little doubt who is responsible for this mess: the finance ministry. If the ministry can appoint an interim CEO when needed, it is surprising why it can’t find any CEO apart from Omita Paul’s brother in 15 months.
During this time, T Rowe Price has threatened to quit, and even the normally reticent public sector institutions – which own 18.5 percent each in UTI Mutual Fund – are said to have sent the finance ministry a warning that Jitesh Khosla – who has no financial sector experience – will not do.
From ONGC, to LIC to Coal India to UTI Mutual Fund, the debasement of public sector institutions for personal or political ends continues.