AP Kurian, Chairman, Association of Mutual Funds in India (AMFI)

AP Kurian, Chairman, Association of Mutual Funds in India (AMFI), has been with the financial services industry for over three decades and has held senior positions in the Reserve Bank of India and in the Unit Trust of India. He is presently on the Board of Century Textiles and Industries and the National Stock Exchange of India, and on the Executive Committee of the National Securities Depository Ltd. He is a member of the Governing Council of UTI Institute of Capital Markets (UTI ICM) and a member of the Board of Governors of the Council for Portfolio Management and Research. He is closely associated with the Securities and Exchange Board of India (SEBI) and is a member of the Mutual Fund Advisory Board, Technical Group on Derivatives and Working Group on Dematerialisation.

The Association of Mutual Funds in India (AMFI), the apex body of all registered asset management companies, was incorporated on August 22, 1995, as a non-profit organisation. As of now, all the 39 asset management companies registered with SEBI are AMFI members. AMFI functions under the supervision and guidance of a Board of Directors. AMFI is dedicated to develop the Indian mutual fund industry on professional, healthy and ethical lines, and to enhance and maintain standards in all areas, with a view to protect and promote the interests of mutual funds and their unit holders.

Speaking with Meenakshi Patki and Jasmine Kohli of India Infoline, AP Kurian says: “It is a challenge for Indian AMCs to comply with the reduced time period for NFOs.”

What is the status of AMFI’s online trading platform for mutual funds? What has been the experience, as you see it, following the launch by BSE and NSE? Is AMFI still planning to have its own service platform or will you provide some value-added service to the bourses?
That was our initial thought behind having AMFI’s own online trading platform. Later, we generated that thought and developed a conceptual framework for it through developing a neutral platform for enabling easy and relatively cheaper trading, both for the distributors and investors. It was a year ago that we started thinking and we formed a committee. The committee did an extensive study and research. We also studied international practices. The committee finally came to the conclusion that there can be more than one platform so that we promote competition also. We identified certain entities and then it was thought that is it necessary for AMFI to participate in that platform and be a part of it or just be a catalyst. Finally, after we discussed with different agencies like BSE, NSE, NSDL, CAMS, Karvy, etc, we came to the conclusion that it is better that AMFI, who has created the concept and the framework, should leave it to the market forces to establish and settle these platforms. In between, NSE with NSDL announced a trading platform, an order routing platform. So, in the context of these developments and our own thinking we felt that AMFI has created interest in this and has conceptualised the whole thing and various details have been worked out, but this is the time that AMFI should step back and withdraw and let the market decide.

NSE and BSE have started their own platforms, which is actually an order routing platform now that has to be developed. CAMS and Karvy has together brought out the platform. So, let the market do that, we have done our job and now we step back.

SEBI has initiated a very investor friendly move of removing the entry load. Do you support this? This step has led the distributors to abandon selling mutual funds and focus on distributing insurance products. How does AMFI plan to tackle this problem?
To a large extent, this has actually happened. So, we need to build this up and we have to wait patiently. Because removal of the load and making the investor pay directly to the distributor is a paradigm shift in the way the business of mutual funds is done. Such a shift is a major shift and it’s a major game changer. This would take time; we have seen that in the past five months. Now, it’s the seventh month and the data is not at all encouraging.

How do you view index funds and ETFs (exchange traded funds) in the Indian context?
Both Index funds and ETFs are passive funds. Therefore, they mimic the underlying indices. Their cost and expenses are very low compared to managed funds. Both, Index funds and ETF have not been very popular, as it gives what the market gives and nothing more than the market.

In ETF, we have about 12 ETF schemes and the total ETF assets are only about Rs12bn. So, it is taking time to develop this product.

How do you perceive the future of ETFs?
ETFs have a promising future. It will grow as and when people understand the advantages of ETFs. ETF is a very cost-effective way of investing in equities. Different types of ETFs have come, like banking, general, etc. So, it will take time to make this popular.

Is AMFI taking any initiatives to educate the investor?
Yes, as a trade body, right from our inception in 1995, promoting mutual funds and conducting investor education has been our top priority. Over the year we have conducted more than 1,000 workshops of investor education. We were the first to come out with an introduction to mutual funds in layman terms—spreading knowledge about mutual funds, its advantages, how it is organised, etc. We have also tied up with many organisations like ASSOCHAM, FICCI, CII and a large number of trade bodies to conduct investor education programmes.

Does AMFI have any plans to be a self regulatory organisation?
No, after a very detailed and careful study, and also after looking at international experiences, we have decided way back in 2003-04, that it is not in the interest of the industry or the regulator for AMFI to become a self regulatory organisation. We stick to this conclusion as of now.

What is the status of the real-estate mutual fund’s launch? What are some of the challenges you see here?
Real-estate mutual funds were launched two years ago and guidelines have been issued. The major issue revolving around it is the valuations issue. This is the main issue which has to be tackled.

As of now, nobody is very keen to launch real-estate schemes, as the risks are too high and real estate hasn’t recovered much after the crisis. Now, it is slowly coming up and is very volatile. It is a business which requires expert knowledge; it is not like investing in equity and debt and money market instruments. It is a different type of a ball game and fund houses are not showing much interest, as of now.

Your view on gold ETFs and other ETFs introduced in India? Can gold ETFs replace physical gold holdings? Why do you think funds have not launched some friendly SIP schemes for gold ETFs?
It is a very promising sector, though it will not replace the physical holdings of gold. It will help people to build gold assets without seeing, touching and holding gold. This is a great advantage. There are already six gold ETFs and a few more are coming and assets under the gold ETFs are more than the other ETFs. It is about Rs14.25bn as of January and for February, it is Rs15.83bn, higher than other ETFs, which are only Rs13.42bn. As of now, there is no SIP for gold ETF. It is still being worked.

Why are mutual funds apprehensive of participating in interest rate futures?
Well, they are not apprehensive; it’s just recently been launched. Mutual funds have to understand and appreciate the advantage of interest rate futures and are still in their learning curves. This is chiefly the main reason for its slow pace and aggression.

What is the importance of AMFI, especially post the 2008 economic crisis?
AMFI continues to play its role; we are a trade body and we interact with all authorities like RBI, SEBI, etc. We take the views of the members and collate them. We formulate the industry view and approaches on many aspects. We then convey this to the regulator. We are the eyes and ears of the industry. We continue to play our role.

During the crisis, AMFI was the one to take the matter to the RBI, the government and SEBI. We worked hand in hand in order to see that the impact of the crisis is well managed.

Resource mobilisation in 2008-09 was around Rs-5.55bn. What level of growth rate do you expect to be restored?
During the crisis period, around September-December 2008, there was a definite fall. From September-October 2008 till about April 2009, there was a monthly fall in the growth. It was in the negative terrain, but in May 2009 the growth resumed. For 2009-10, we have grown 56% over the year. In February, our assets have grown 56% over the year, and have resumed our growth path.

What are your policy prescriptions for mutual funds, which in your capacity you dreamt of having?
(Laughs) I don’t know how to answer that. We have constantly tried to upgrade the industry in terms of standards, disclosure; in terms of transparency and in terms of best practices. We have done all this continuously, along with investor education. This is our dream and it is being carried out. There is no end to our efforts.

How do you see the penetration of mutual funds in Tier-II and Tier-III cities and rural areas? In your opinion which measures could help increase penetration?
We need to have more distributors; we need to have more branches. These days more fund houses are establishing franchise and opening branches, and all these efforts are undertaken to reach out to the Tier-II and Tier-III cities.

Your take on ASBA being introduced for mutual funds?
AMFI welcomes this move of SEBI. Now people can give their cheques through ASBA and on the last day they can debit the amount.

How prepared are Indian AMCs for the reduction in time period for NFOs?
Yes, it is a huge challenge for Indian AMCs and fund houses to comply with the reduced time period for NFOs. The fund houses will have to plan the launch well in advance and do their marketing efforts well in advance.

Despite AMFI’s strict directives, the mis-selling of mutual fund products is increasing day by day. Does AMFI have any way out for this?
Mis-selling is an issue, but there are strict rules about this. When it is reported and importantly, when it is proved, we certainly take action. Merely by saying that some mis-selling has taken place is of no use. If there is no proof, no action can be taken. It is two-way traffic and just reporting mis-selling is not the way out. It is a misnomer, we have to be careful while talking about mis-selling and we have to prove it. We have to have adequate proof of mis-selling. This is the challenge we have.

What are your retirement plans? To what extent will you miss AMFI?
As of now I have not firmed up on my retirement plans. I will cross the bridge when I come near it. Well, AMFI has been a part of me. It is my 35th unbroken year in AMFI. I will adjust to that…. life must go on.

What is your greatest achievement as part of AMFI?
We have been able to set many milestones, and I would consider many things which we have been able to establish. We contributed to setting international standards in diverse fields. Among the most important things, which I personally feel very happy about is the introduction of AMFI certification examination—getting them registered, giving them a qualified status for the distributor community. I feel extremely satisfied that AMFI provided, for the first time in the world, a common platform, the AMFI website, to host the NAVs of all the schemes. That’s one place where you can get all the NAVs. Similarly, we were pioneers in promoting benchmarks indices for debt schemes, money market schemes and balanced schemes. So, I would only say that we have served the industry. I tried to do my best for the industry.

Do you have any unfulfilled wish during your term in office?
No, nothing as an unfilled wish. It’s an ongoing thing and I don’t have regrets.

The name AP Kurian and mutual fund are synonymous. Any message for the industry and the investors of mutual funds?
It’s so early; you will have to wait till September. Don’t retire me so soon. I think mutual funds are a good medium for the common man to build wealth. Everyone should look at mutual funds because it is well regulated, strictly complied with and the cheapest way to build wealth over a longer period of time. So, it is an instrument and an asset, which every saver of this country should have in their portfolio.

Source: http://www.indiainfoline.com/Research/LeaderSpeak/AP-Kurian-Chairman-Association-of-Mutual-Funds-in-India-AMFI/9915675