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 Ashish Somaiyaa, the CEO of Motilal Oswal Asset Management Company had to say:
What factors would increase the appetite for investing in mutual funds beyond the top 15 cities?
Instead of just plain vanilla mutual fund products, the industry needs to have multi-asset products that can deliver returns higher than fixed income but with lower volatility. There need to be products which address saving and investment needs of investors at the same time. The focus of these products should be absolute returns and help the investor plan their life goals. Further requirements would be positive real returns, i.e. inflation adjusted.
Have the direct plans seen greater retail participation?
I have not seen any meaningful participation in direct plans as far as retail equity business is concerned. In the retail scenario, investors will need advice as well. Hence they will either be savvy enough to plan their portfolios or will be willing to pay a small advisory fee if they are to invest in direct plans. I believe in the concept that mutual funds are prescription products and not meant to be 'over-the-counter' unless the investor is an expert and knows exactly what is required in his or her portfolio.
What investor education initiatives has your AMC taken?
We have an ongoing programme for education on all our social media properties. We prepare audio and visual clips which the investor can access to gain knowledge on specific topics in the investment universe like specifically on low cost ETFs. Larger than that initiative is our advisor education along with asset allocation knowledge sessions which aims to cover wealth managers and independent financial advisors. At the same time we have been conducting huge number of investment awareness meets physically jointly with distribution partners and third party trainers and experts.
What's the road ahead for your AMC?
Motilal Oswal AMC is engaged in two areas of product offerings. a) active equity management b) aiding asset allocation. Over the next 3 years we would like to be recognized as an expert equity house with a focused investment philosophy. We would like to be a specialist equity house. At the same time we are already known to be an innovative provider of passive products like low cost equity exchange traded funds and passive debt funds. With direct plans coming into mutual funds and investment advisory regulations, we believe that advisors will be happy to use ETFs as part of their recommendation to investors. In any case it is a well known fact that alpha in the investor's portfolio comes from being in the right beta and ETFs and Passives have an undeniable role to play.
Brief us about your personal investment philosophy?
Like I stated, Alpha comes from being in the right beta. But in reality investors and advisors spend too much time on picking the right funds and fund mangers instead of ensuring they are in all the right asset classes. In the month of august 2013, Indian liquid funds, Indian debt funds, Indian large cap equity funds and Indian mid cap equity funds. If you did not have any money invested in US dollar denominated assets in August 2013, then it did not matter which Indian fund manager was managing your money. One has to have diversified exposure to specific asset classes otherwise a highly correlated portfolio will result in significant drawdowns and Volatility. An example is exposure to the NASDAQ-100 ETF which is weakly correlated to Indian fixed income as well as equity markets. This held my portfolio in good stead in August 2013. I practice diversification across asset classes very religiously and spread my investment across domestic mutual funds, international funds, real estate and gold.