'We typically advice new investors to start with passive funds'

How is your team viewing the current market valuations and preparing for possible corrections?

Market valuations are currently at a premium to their long-term average. Mid and small caps are trading at higher valuations than large caps, as reflected in their respective indices. Moreover, the share of mid and small caps in aggregate market capitalisation is significantly higher than its historical trend. Large caps are better positioned in the current market than mid and small caps.

At UTI AMC, we consistently advise investors to maintain an appropriate asset allocation based on their financial goals and risk appetite. This should be the foundation of investors' decisions rather than their ability to forecast the timing and magnitude of market movements.

Are index and factor-based passive funds a fad or a lasting investment strategy?

Active and passive funds are complementary investing styles that provide diverse options to investors. Both have significant growth potential.

Passive funds offer a straightforward yet effective option for investors looking to capture beta. We typically advise new investors to start with passive funds, as they are easy to understand. Investors may consider active equity funds as they gain knowledge and confidence to make informed choices. Additionally, many institutional investors with in-house expertise will likely use passive funds to capture beta.

Factor-based index funds are particularly popular among DIY (do-it-yourself) investors, as they allow investment in specific factor indices based on individual market views. We expect passive and active investing to continue to coexist.

Will AI impact your business? How and why?

For us, AI represents an evolution aimed at automating processes, accelerating our operations and making our services more efficient and accessible. For example, research and investor analytics are areas where we anticipate AI will help employees save significant work hours, allowing them to focus on more critical assignments. We also see AI playing an active role in enhancing our digital initiatives, enabling us to offer more personalised services to our investors.

Rapid-fire questions

• If your fund house had a superpower for investors, what would it be?
  To make investing in mutual funds as easy as buying an ice cream.
  
• The biggest mutual fund myth you'd debunk.
  The myth that mutual funds are complex to understand.
  
• An unconventional asset class you'd add to your portfolio.
  NFTs (non-fungible tokens) and collectibles like fine art and vintage cars.
  
• A Bollywood movie that best represents the mutual fund industry today.
  Guru.