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Mutual Funds are not Risky, but they Mitigate Risk

Mr Vibhav Kapoor, Managing Director and Mr. N.K. Sharma, Chief Operating Officer of IL&FS echo that the awareness about mutual funds is very low and many investors still look at mutual funds as a risky investment. As an industry, we need to educate investors that mutual funds are not risky but they mitigate investors risk.....

IL&FS Mutual Fund came into business in 1999 with the launch of IL&FS Bond Fund. This was followed by its equity funds – Growth and Value Fund (Oct. 1999) and e-COM Fund (Feb. 2000) and its Liquid Fund in July 2001. Now the fund house is getting its acts together – beefing up its investment management, distribution and slew of new launches to complete its product offerings.

Mr. Vibhav Kapoor, Managing Director and Mr. N.K. Sharma, Chief Operating Officer of IL&FS Asset Management share their road map, in a discussion with Rachna Monga and Arvind Kumar, Analysts at Value Research.

On the strategic focus of IL&FS AMC
We want to offer our investors a full range of products. Its not our strategic decision to be a pure debt fund or an equity fund hous. Debt funds were favoured in the past 1-year and even now, which explains more assets in our debt funds.

On disadvantage of being a late entrant with Gilt and Index fund.
With the launch of the Gilt and Index fund, we will have all the essential funds to offer. The awareness about mutual funds is very low and many investors still look at mutual funds as a risky investment. We believe that there exists a wide market for mutual funds. As an industry, we need to educate investors that mutual funds are not risky but they mitigate investors risk. We need to create greater awareness about convenience, liquidity and tax efficiency of fixed income funds. We see a great potential for Index funds in India. In the US markets, Index funds manage more money than the actively managed equity funds. We believe the cash fund is a superior alternative to a savings account with bank. To attract individual investors we have a lower minimum investment in our cash fund.

On plans to induct a foreign partner
We will be open to rope in a foreign partner if it adds good brand value to our funds.

On the investment strategy for IL&FS Growth Fund
Last year technology stocks became the mainstay for every diversified equity fund, we were also upbeat on technology. Presently, IL&FS Growth & Value Fund has a well- diversified portfolio with a bias towards the old economy stocks. For long-term growth, to beat the benchmark and for superior relative performance in IL&FS Growth & Value Fund, we invest in growth stocks, in the absence of value triggers in India.

On IL&FS eCOM Fund
In 2000, the year we floated eCOM Fund, there was an unprecedented euphoria about technology stocks. Today we see the reverse, pessimism and under-valuation. We follow a bottom-up approach in our stock selection for the fund, taking into account sound business model irrespective of its capitalisation. Given the small universe of such technology stocks and the ceiling on individual stock exposure, we allocate 60 percent of the portfolio to the technology sector.

On his views on the direction of equities in 2002
It is tough to predict the market. But we think the markets will gain stability within three-four months.