In an annual review on fund families, we spoke to mutual fund honchos to get their views on some of the pressing issues facing the industry. This is what G Pradeepkumar, the CEO of Union KBC Asset Management Company had to say:
What factors would increase the appetite for investing in mutual funds beyond the top 15 cities?
To gauge factors that would increase investment from other than top 15 cities, we need to know what element is missing, and why the top 15 cities contribute more than 85 per cent of the total mutual fund industry.
The two specific reasons that come to my mind are accessibility and awareness. Lack of strong distribution network in other than top 15 cities has to be addressed and followed upon. The new cadre of distributors allowed by Sebi that includes postal agents, retired teachers, retired government and semi-government officials (class III and above or equivalent) with a service of at least 10 years, needs to be developed with more vigour. These distributors can take mutual funds to the doorsteps of more and more investors. Mutual funds are very good saving instruments for retail investors as they are transparent, cost effective and liquid compared to other available options. There is a strong need to create awareness through simpler product offerings and an easy approach of communication on the overall value proposition that mutual funds offer.
In our experience, we have seen that wherever we are able to reach out to investors, the penetration has been very good. As on June 2013, approximately 10 per cent of our total AUM and around 35 per cent of total SIPs come from cities classified B15 by AMFI. This has been achieved largely on account of our distribution model. We also believe that technology can be used to increase the penetration significantly. We have introduced online transaction facility through our website. We have also introduced the facility to transact in our funds through ATMs.
Have the direct plans seen greater retail participation?
According to numbers available with us, the retail participation through direct plans was the highest in the month of January 2013, when this was introduced. However, since then, this has been fairly stagnant from the T15 cities and reducing in the case of B15 cities (as per AMFI classification). In our opinion retail investors would always see value in receiving advice on investment matters, and the role of the distributor cannot be taken away. However, direct plans would benefit informed retail investors.
What investor education initiatives has your AMC taken?
We started Union KBC “Prabodh” an initiative of Investor Awareness Programme in September 2011. Through this initiative, we tried to create greater awareness among retail investors about the advantages of investing in mutual funds, and enlighten them about the opportunities that mutual funds can offer. Under Union KBC “Prabodh” we have already organised more than 1,400 Investor Awareness Programs for retail investors over the last two years. Around 17,000 investors participated all over India in such programs. Out of this, around 7,000 were from cities classified as B15 by AMFI. It is a multi-layered initiative focused on investor education and the practical goal of getting more and more clients informed about financial products which would help their financial planning process.
What's the road ahead for your AMC?
Going ahead, we would still continue to invest our resources primarily to reach out to more and more investors. We see great scope in expanding the investor base for mutual funds by continuing our efforts on investor awareness programs and on enhancing accessibility with the help of technology. While it is a competitive market, it remains highly under-penetrated. Access to investment advice and ease of investment would be the key factors in increasing the penetration. We will also continue to use our resources in working closely with the distributors and making sure that we are able to offer the right product for the right set of investors and at the right time. We would also focus on offering simple products to retail investors. The simplicity has to come in the value proposition to the investors even if the product is relatively complicated for the manufacturer. It has happened very often that the NAV of a particular scheme has gone up but the investors never managed to realise the gains. This has resulted in certain amount of dissatisfaction among investors in the sense that they never really received money in their hands even when the markets did well and that the gains remained on paper. We are trying to address this through product innovation.
Brief us about your personal investment philosophy?
My investment philosophy is fairly simple - invest when you have surplus funds and redeem whenever you need it. I am also a firm believer in SIPs, and am confident that SIPs would offer the best value for retail investors in the long term.
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