Indian MF industry has immense growth potential: Jimmy A Patel, CEO, Quantum Mutual Fund
Indian Mutual Fund
The Indian mutual fund industry is currently going through a rough patch. Not only are the industry's assets under stress, but given the current macro-economic concerns, the survival of many of the relatively small and new fund houses is under doubt. With retail investors becoming more skeptical about the MF industry, the ET Intelligence Group attempts to address their concerns by asking industry veterans to give a fresh perspective on investment prospects, and the growth drivers and factors that are likely to impact mutual funds in India . Edited excerpts:
Jimmy A Patel,
CEO, Quantum
Mutual Fund
How would you describe the current state of affairs in the Indian MF industry?
The Indian mutual fund industry has immense growth potential, and if aided well
by technological advancements and increased awareness, MFs can be a major
contributor to the overall Indian economy. However, it appears, the industry
has not learnt from its past mistakes. The industry still seems to be operating
on an asset gathering mandate, and not an asset managing one; the focus of the
industry still seems to be driven by business agendas and not on building a
community that is truly concerned about its investors; market share and
"piece-of-the-wallet" concerns still precede issues like investor
safety and delivery of risk-adjusted returns. The fund industry is still in a
learning stage, though unfortunately, it seems to forget its earlier lessons
all too soon
The MF industry, a few years ago, had set tall targets for itself. How far are
we from achieving those targets?
Targets are necessary. It's not just about achieving them, but more about
moving in that direction. Rather than meeting a number, the industry should
focus on becoming absolutely investor-friendly - right from the time an
investor starts understanding about mutual funds through to the entire
experience of helping him create wealth. Better regulations, advanced
technology and conscientious managements will help in moving towards this aim.
Why should retail investors invest in funds when the future of many fund houses
itself is in doldrums?
When you choose to invest with a fund house, you should ascertain its
background well so that you can be sure of the future of your investments. In
times such as now, retail investors should choose to get convinced about the
investment philosophy of a fund house before investing in it, rather than get
convinced by brilliant marketing gimmicks or aggressive distribution
strategies. Investors must take care to choose their fund well.
Should the retail investor (today) go by the fund house or
the scheme performance's, especially if the scheme belongs to a smaller fund
house?
If a fund is like a prospective life partner, a fund house is like its family.
If you have solid family background backing your chosen partner, it reduces the
scope of unwanted future uncertainties. However, the size of fund or a fund
house has little to do with its performance. When you look at performance,
consider consistent track records rather than spikes in returns, especially in
the short term. A consistent fund will probably provide you with greater
comfort in times of volatility as compared to a one-year star performer.
What do you think is the future of relatively smaller and newer fund houses?
The skepticism about the future of smaller fund houses is sheer speculation.
Smaller fund houses will continue to do well in the coming years just like
their larger peers. The Indian mutual fund industry has a bright future for
transparent and ethical fund houses that are truly concerned about investors
and focus on investor security and on delivering risk-adjusted returns,
irrespective of their size or their years of existence.
Do you think the industry will consolidate in the coming years?
While the law of economics suggests consolidation, which would reduce costs
greatly, different fund houses have different needs and objectives which might
not sync favorably with such an approach. For all you know, several fund houses
may not even go for consolidation; the moment they see their business becoming
unviable they may just exit the business. This may be the case for foreign fund
houses operating in India. Domestic fund houses again will not consolidate
their business; they will try to survive the bad times... They will wait for a
gain in their valuations before finding a partnership deal with some other
player wanting to start an AMC business in the country.
In current times, when survival of the fittest holds water, what steps have you
taken to ensure your existence? What are your strategies to sustain this
business?
We are a different fund house. Being the only direct-to-investor fund house, we
are constantly exploring new avenues to reach out to our investors and spread
what we call "the Quantum way of investing". Here again, the online
medium would be our strength as we look to reach out to the base of over 100
million online Indians and bring them a better way of creating wealth over the
long term. Some of our best ideas are a simple implementation of our investors'
feedback.
Do you think it is time the industry explored newer investment avenues - beyond
equities, fixed income and gold?
Investors today are saturated with schemes. Investors are also paranoid about
opaque markets, the disappointing corruption reports and repetitive scams. It
thus, is the responsibility of the industry to collaborate to re-instill faith
in investors, not by increasing the number of investor awareness programmes, or
by launching new ad campaigns to promote this message, but by simply stepping
away from the wallet-share game and retrospect on how they could best be asset
managers working for the benefit of the end investor.
What is your advice to retail investors with respect to investing in mutual
funds and equity markets?
The purpose of investing in MFs is to have a professionally managed portfolio
of products that suit your requirement. An investor has a few basic
requirements: one, create wealth over the long term for which you need an
equity scheme; two, save tax for which you would need an Equity-Linked Savings
Scheme; three, need to have some cash in reserve in case of an emergency for
which you will need to look at a debt/liquid scheme; and four, need to counter
equity exposure for which you could opt for a Gold ETF. These are the basic
products that an investor needs to have, and not the hordes of schemes that
clutter his portfolio.
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'I made my money by selling too soon.'
Website: http://indianmutualfund.co.cc/
Blog:http://indianmutualfund.wordpress.com/
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