It is no secret that not only the last one year but the last three years have been fantastic for the industry. Government policies of demonetisation and the crackdown on black money have helped funds flow from physical assets, like gold and real estate, to financial assets. This has especially helped the mutual fund industry, with AUM and the number of folios increasing at a good clip. Low interest rates have also contributed to the shift to mutual funds as deposit rates are not very attractive.
Our investor base grew by 61 per cent and number of SIPs grew by 70 per cent in the last one year.
Managing return expectations
The most important thing to do is to communicate and be transparent with investors. We have been communicating with investors through our factsheets every month. We are the only fund house to hold AGMs for our investors, where we diligently answer all their queries and concerns. In fact, one of the main purpose of our AGMs is to manage expectations of our investors and be transparent with them regarding our thought process.
Firstly, we do not get desperate to deploy money if opportunities are not there. We are currently sitting on 16 per cent cash in the fund due to the sale of some securities at higher levels. So we are very well positioned to take advantage when opportunities present themselves.
We are encouraging SIPs rather than lump-sum investments. We are also staying away from certain hyped-up and expensive sectors. We will be cautious and let valuations dictate our investment strategy.
Rising industry assets
Actually, this does not pose much of a challenge to us, given our relatively smaller size. Also, we can invest up to 35 per cent of the funds outside the country. This provides us necessary flexibility and does not constrain our investment strategy.
Growing clout of domestic funds vis-a-vis FIIs
This has been a good counter balance to the FII participation. Earlier when FIIs sold, there would be panic and markets would tumble. This is not the case today.
Outlook for equity and debt
We are very positive on equities from a long-term perspective. Here, long term means over five years. Currently, there are pockets of excesses and fancied sectors which need to be avoided. With inflation and interest rates coming down, one should expect nominal returns to also come down.