MFs bank on 'skin in the game' to draw investors

Kotak MF asks its staff to invest in its own schemes in order to build trust; Raamdeo Agrawal's personal investments are made through Motilal Oswal AMC

Indian mutual fund houses are coming up with innovative methods to boost investors’ confidence and build trust.

Kotak Mutual Fund is the latest addition to the list. With effect from July 15, the fund house has asked employees who invest or want to invest in mutual funds to invest only in its own set of schemes. The fund house believes the step will help make investors confident about the fund house.

 

In a statement, Kotak Mutual Fund CEO Nilesh Shah said, “I strongly believe in ‘the owner eats here’ sign displayed at restaurants. This first-of-its kind initiative is our way of showing faith in our product offerings. This will assure all our stakeholders – distributors and investors - that we practise what we preach.”

Senior management or employees investing in their own schemes isn’t a recent trend. However, so far, it was being done voluntarily. “It’s a good initiative from Kotak Mutual Fund. However, it should not have been enforced on employees,” said Dhirendra Kumar, CEO of fund tracking firm Value Research.

 

New entrant Motilal Oswal Asset Management Company (AMC), too, believes in putting more skin in the game, which is  putting one’s own money in their business. Founder Raamdeo Agrawal says the surplus cash of parent Motilal Oswal Financial Services and his personal investments are now made through their AMC division. “The conviction shown by our founders is to set a trend for our employees, too. But we are not forcing our employees to invest in our schemes,” said Aashish Sommaiyaa, CEO of Motilal Oswal AMC.

Experts say globally, investors look for fund managers investing in their own schemes before choosing a scheme. The senior management (including CEOs and fund managers) at several fund houses invest in their own schemes. Such a move, experts believe, helps showcase trust in their own offerings.

ICICI Prudential AMC, for instance, offers long-term incentives for the past five years, which are a part of variable pay to their senior employees. These incentives are invested in schemes of ICICI Pru Mutual Fund. These long-term incentives are paid in the ratio of 30:30:40 spread over three years. “Given the good track record of our schemes and trust in the brand, all our employees invest with us. Hence, we have not made it compulsory,” says Nimesh Shah, managing director and CEO, ICICI Prudential Mutual Fund.

Kotak Mahindra and associates are significant shareholders in Business Standard Private Limited