MF industry allows only the best to survive: Waqar Naqvi

Waqar Naqvi, chief executive officer (CEO) of Taurus Mutual Fund, shares insights about the MF business and the challenges that the industry and his company would face.

He has close to two decades of experience - mostly in the AMC business. He has been instrumental in the transformation of Taurus Mutual Fund from one of the bottom-five players to a growing mutual fund.

>With new players expected to come, in what are the career opportunities that this industry would offer?

People with nerve, ethics and patience would find excellent opportunities coming their way in sales and distribution, financial planning, product development, customer service, compliance, HR and fund management due to expansion plans of existing players as well as new entrants. The MF industry allows only the best to survive.

>How are you planning to drive up retail participation in your AUM mix?

Taurus Mutual Fund`s average AUM stood at Rs 24.38 billion on June 30, up from Rs 3.68 billion when we took over in early 2008. It has been a concerted effort on our part to spread investor awareness for our customers, both institutional and retail across Tier-I, Tier-II and Tier III cities.

All our equity schemes, including the Taurus Ethical Fund, have shown robust and consistent performance since inception. Performance of our schemes in the fixed income segment has been commendable. The fact that Value Research rates Taurus Infrastructure fund five stars and Taurus Tax shield four stars stands testimony to our fund performance. We intend to stick to the basics and work hard and smart. There is no shortcut to success.

>What checks and balances do you have in place to prevent front-running by fund managers?

Taurus has a well defined and comprehensive surveillance system to check front-running.

Access to dealing room is restricted. All telephone lines inside the dealing room are recorded and the records checked every evening. Cell phones are also not allowed in the dealing room. All activities such as instruction to place the order (by fund manager) and the placing of an order (by dealer) are done online. Our Bloomberg systems start tracking the order processing activity immediately.

The Head of Operations can see the movement of the order online. This system also records the time gap between the actions of fund manager, dealer and their communication of the same on a real-time basis.

This rules out front-running. It is more a matter of not allowing indiscipline in the internal policies and following them assiduously irrespective of the trust and longevity of employees.

>How do you tackle the issue of mis-selling?

Mis-selling by the sales personnel can be avoided by not having too many schemes; it helps the sales personnel as he need not remember so many schemes.

Continuous updates on products and financial markets both debt and equity also gives them the knowledge to address queries and not indulge in mis-selling.

The risk manager, compliance officer, internal auditor, sales head and yours truly also interact with sales people and channel partners regularly to ensure this is avoided.

In addition, our customer service personnel interact with every client on phone to ensure that clients have been correctly briefed about the objective and expectations. This is also recorded at our end and reviewed periodically.

>What changes in the distribution channel mix do you envisage in the next 5-6 years?

The MF industry today reaches the investor through Independent Financial Planners (IFAs), banks (predominantly foreign and Indian private banks have been selling), national level distributors (NDs), online channel, stock exchanges and walk in direct business. There is a huge space which public sector banks can fill in. However, they seem to be suffering from inertia, which I feel, would vanish soon. We foresee a slight juggling of the percentage share between banks, IFAs and NDs.

We intend to stick to the basics and work hard and smart. There is no shortcut to success.

>The SEBI Chairman had observed recently that 60% of the schemes are underperforming. Are we going to see closure or merger of schemes across fund houses?

When our new team took over in March-April 2008, we had four equity schemes, one equity-linked savings scheme (ELSS) and three debt schemes. Today, we have 12 schemes and have added two equity, one liquid and one monthly income plan. Taurus has been a fund house that has not launched schemes similar to each other. We have a very clear demarcation between our schemes and intend to keep it that way. Hence, we do not see a need for closure or merger of schemes at Taurus.

>Many mutual funds are moving towards an online platform. How is this going to help in Tier-2 and Tier-3 towns?

Online platforms and no-load schemes have been available for a few years now. They have not seen any traction worth taking note off. India, Asia and perhaps the world is still an entity which wants to relate people to people. We have not seen a major inflow of online transactions in Tier-I metros till date, hence online transactions taking off on Tier-II and Tier-III seems to be some distance away.

Source: http://www.myiris.com/shares/company/ceo/showDetailInt.php?filer=20100715101746707&sec=fm