Funds see short-term pain, but long-term gain

The mutual fund industry sees the series of recent regulatory measures as a game-changer — something that has prompted it to think out of the box on increasing the penetration from the existing 4-5 per cent of household savings.

Participating at the Fund Café, organised by Business Standard in mid-November, heads of five leading mutual funds said the decision on the entry load ban in June came “too soon” as a result of which the participants did not get enough time to make the transition. The outcome: the industry’s sales growth declined for a couple of months.

However, they acknowledged that the decision would go a long way in improving transparency and improve the way the industry functioned. The consensus was that there would be long-term gain and a lot of short-term pain.

Excerpts of Fund Café have been carried in the special 16-page supplement — Fund Manager — being distributed free with Monday’s edition.

The panelists also said that the industry should do more to improve the financial literacy levels and that they would take steps to upgrade the skills of the financial advisers and distributors. Despite the challenges, most struck an optimistic note and said the equity schemes should grow by at least 30 per cent over the next three to four years.

Another point that came out during the discussions was that the top 10 funds accounted for 80 per cent of the total assets under management. Also, while the top five funds were very profitable, the next four or five made some money and the rest actually lost money.

A four-member jury, headed by National Stock Exchange Managing Director & CEO Ravi Narain selected the Fund Managers of the Year for both Equities as well as Debt. The other members of the jury were Standard Chartered PE Advisory MD Nainesh Jaisingh, McKinsey MD Joydeep Sengupta, and IndAsia Fund Advisors Chairman Pradip Shah.

While IDFC AMC Head of Investments Kenneth Andrade was chosen the Fund Manager of the Year for Equities, LIC Mutual Fund’s Fund Manager Ashish Kumar was the Fund Manager of the Year for Debt.