Excerpts:
Business Standard: What, according to you, is the future of the mutual fund industry in India?
Ashok Pradhan: Currently investors have a negative perception about the equity markets in general. A large number of investors, who had put in their hard earned money in IPOs (initial public offerings) have burnt their fingers. Even in mutual funds, people have put in lots of money.
Since most of these schemes were primarily equity-oriented, there was a sharp fall in their net asset values (NAVs) along with the declining indices. Our capital market is currently going through a transitionary stage and as in overseas markets, mutual funds will be the ultimate investment vehicle for small investors.
BS: Have you conducted any study among your potential investors?
AP: A study among retail investors will not give the right answers at this point of time, for investor confidence has hit an abysmally low point. Servicing the investors is a crucial area which every asset management company has to address. However, it has been found that fixed income schemes do have a market in India.
The Indian investor typically wants to be guaranteed of a regular return.
BS: Are you planning to launch any fixed income scheme?
AP: The board of GIC Mutual Fund has taken a decision to periodically launch fixed income schemes. We have already launched Suraksha-II, the second scheme in the Suraksha series. Here we had promised a minimum return of 14 per cent. The interval between these schemes will be around three months. Since the Mutual Funds 2000 report has lifted the clause of minimum collection, the burden of meeting the targeted corpus will not be there.
BS: Recently two AMCs with substantial foreign holdings had tapped the market with open-ended schemes. The results, however, were far from satisfactory. Please comment.
AP: Both these schemes have been able to mop up their required corpus. These schemes were structured well and all I can say is that they were caught in the scenario of retail investors moving away from mutual funds.
If the present conditions continue it is the smaller schemes which are going to be hit. Larger funds, in the long run, will always survive.
Every MF scheme -- more specifically the smaller players -- has to minimise losses and concentrate on consolidation of their activities.
BS: What is the future of the smaller funds, facing rising costs of custodians and R&T agents?
AP: The smaller AMCs will have to find ways of servicing their investors.
It is a decision which only these players can take, and they have to do it themselves. They have to cut corners, keeping in mind the interests of the investors.
