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'Retail Investor Will Be Back'

Dileep Madgavkar, CIO, Prudential-ICICI MF shares his opinion on mutual funds, markets and investors' psychology in an interview with Mutual Fund Insight

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In four years, Dileep Madgavkar has gone from managing Rs 160 crore at Prudential ICICI to managing over Rs 10,000 crore. Prudential--ICICI, a joint venture between ICICI and Prudential Corporation Plc. It has product basket ranging from a plain vanilla equity fund to a an exchange traded fund which was launched recently. As on February 28, 2003, its amongst the two AMCs to have a 14 per cent market share (excl UTI) of the industry.

Being the CIO of a fastest growing AMC, Dileep is of the strong view that the retail investor will come back to the stock market via mutual funds route. In an interview with Mutual Fund Insight during December 2002, he tells volumes about how the AMC started off by striking a direct cord with investors, by being different in its performance, service standards and level of communication with investors.

Tell us about your career, and how you became the chief investment officer of India's largest private mutual fund.
I'm a product of many schools--I've studied in ten schools—since my father had a transferable job. I finished school in Calcutta and then did my college and CA there. I moved to Mumbai in 1988 where my first job was in the Bank of America treasury. That was a very interesting experience.

At that point of time, treasury was just about becoming an important facet of Indian banking as a revenue earner. Till then, there were only small treasury operations for foreign exchange but domestic treasury operations were just evolving. From Amex, I moved to ANZ Grindlays, also in treasury.

After the 1992 scam, the markets had become extremely restrictive; they were just drifting along and very little was happening. I decided to do something on my own and became a consultant. I set up treasuries for companies and for banks; I consulted with them about organising their trading activities and managing their money better. After three or four years of working independently, I met up with Prudential ICICI. I thought the mutual fund industry had a great future, even though it did not have much activity at that time. I also had the advantage of having worked in both the debt and equity markets during my time in bank treasuries.

Prudential ICICI was an exciting place with a fresh bunch of people and the very able leadership of Ajay Srinivasan. I began by managing the debt products and subsequently moved to managing the entire portfolio. When I joined we had two funds with about Rs 160 crore and today, four years later, we have funds in excess of Rs 10,000 crore.

Why did the market respond to your fund the way it did?
I think the market was waiting for some activity in the fund industry. We just came as a breath of fresh air. I have the greatest possible respect for the existing players at the time but I do think we did something different. We communicated with the investor differently, our service standards were different, our performance was different. And one definitely needs all three to succeed. I think we were in the right place at the right time with the right set of people and that's what clicked.

Some actual examples of the things you did differently?
We had much more interaction with the investor. We made it a point that even though I was the investments person, I would talk to investors directly. The investor is an extremely astute and analytical person and can figure out who you are and where you are coming from and I think that helped a lot.

What is the fund management structure like at Prudential ICICI?
I head all the investments, every rupee that comes in—with the exception of the portfolio management services—which is managed separately. I have four fund managers in debt, and three fund managers and one dealer in equities.

We don't have analysts; the fund managers<
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