Mutual funds go niche

Intense competition and more regulation prompt move.

Smaller fund houses are positioning themselves as niche players, with focus on a select group of products. Fund market experts say the trend will intensify.

Amid increasing regulatory control and competition, mutual fund houses are differentiating their products and simplifying things for investors.

Benchmark, Motilal Oswal, DSP BlackRock, JP Morgan and Quantum are among those carving out a niche position. Benchmark has established itself in the ETF (exchange traded fund) category and Motilal Oswal is trying likewise. This is happening at a time when the industry is full of products, such as monthly income plans, fixed maturity plans and sector-specific funds.

Dhirendra Kumar, chief executive officer of Value Research, says: “The rules of the game have substantially changed. The mutual fund market is getting crowded, with so many products, and so new entrants are trying new strategies. The era of offering NFOs (new fund offers) and garnering funds is no more there. Small niche players are emerging.”

Rajan Mehta, executive director of Benchmark MF, says, “We constantly look at what additional value we are bringing to investors. From day one of starting this business, we were clear that we needed to offer a select group of products, which should be simple, transparent, cost-effective and fulfill long-term investment needs. So far, we have managed to remain focused and, as a result, achieved leadership in the areas we operate.”

Says Nitin Rakesh, CEO of Motilal Oswal MF: “We have taken a measured approach. Rather than going ahead with seasonal products, we concentrate on select products which are fully research-based, simple and low cost. With our products, we are trying to expand the fund market from what it is on Thursday.” The fund house has one product in its kitty, MOST Shares M50 ETF, an open-ended one, based on the Nifty. It has plans to bring two more ETF products, based on the CNX Nifty midcap and the Nasdaq100.

According to Kumar, bigger fund houses cannot afford to do this, as they have to have all the products in their basket. JP Morgan and DSP Blackrock are bringing their international products to domestic investors. “This is another way of positioning yourself in the domestic market, with different products,” says the executive vice-president of a national broking house.

Adding: “These fund houses are pursuing a trend of positioning selective but strong products. Quantum has a unique strategy. And, foreign-owned fund houses are bringing their global products. Going forward, we will see more such products from JP Morgan, Franklin Templeton and DSP Blackrock.” JP Morgan already has applied to the Securities and Exchange Board of India for an Asean Equity Offshore Fund and a Global Nature Resources Equity Offshore Fund.

Jimmy Patel, CEO at Quantum Mutual Fund, says, “It’s a straight selling of products to investors, without intermediaries. So, there is no commission. We keep the mechanism simple, not confusing, to investors and unless there is an understanding among investors regarding our philosophy of investment, we do not push our products. Investors who have patience and have long investment tenure are preferred, as this way there is less churning.”