Corporates and Mutual Funds

Was watching a interview with Mr.Y.V.Reddy former governor of RBI , and one thing he mentioned was so right . He mentiones that currently big and small corporates are big investors in Mutual Funds , now there are two things that are not right about that.

1) Corporates are suppose to have dedicated finance teams ,teams with people who can understand much complicated financial products ,so what are these firms doing investing in Mutuals Funds .What this does is it gives these firms huge lever as they invest huge amounts and hence dictate terms to the Mutual Funds. and also cause serious damage to smaller investors when they redeem their investments

2) When Mutual Funds have access these huge amount of  money from BIG corporates , they have no incentive to go after the smaller retail investor

Net result , we have woefully small percentage of individual investors , invested in Mutual Fund and hence into equities.

Image : FreeDigitalPhotos.net,Photographer: Filomena Scalise