Code of conduct looks like are resigned to lockers, if one goes by the latest trend in Mutual Fund advertising in India. There are two glaring examples where misleading advertisements are regularly placed in national and international publications to entice gullible investors.
A leading mutual funds is advertising that 100% of its Equity Mutual Fund has outperformed the benchmark for last 5 and 10 years. Once you read on, it mentions that AUM of Equity funds has beaten the benchmark. This is painting a misleading pictures. It is very simple. Suppose, there are five schemes, however AUM is not evenly distributed. For the simplicity sake, assume only one scheme has 99% of the equity AUM while rest four has 1%. As per the advertisement logic, there is an outperformance of 99% of the equity AUM, however, rest 4 funds have underperformed. Investors have given funds to have outperformance in all funds. The correct score will be that only 1 out of 5 fund has outperformance.
Another leading mutual fund is much more blatantly furnishing older information to paint much better performance consistently in a leading international magazine as a pull out where as market value has gone down substantially in the period under question. The Net Asset Value (NAV) is available on daily basis for the fund under consideration, then why fund house is misleading gullible investors.
Now a days, SEBI and AMFI is promoting investor education in a big way while the above mentioned examples clearly suggest what need to be looked to put a plug on sharp advertising practices.
