Poor markets biggest concern for MF industry

The newly appointed MD of Sundaram Mutual Fund Harsha Viji, feels that the market situation and not the regulatory issues is a bigger concern for the MF industry. “While one can hardly do anything about markets, tax sops and industry reforms are needed,” he said in an interview to Sandeep Singh of The Indian Express. Excerpts:

Lot of deliberations are going on around revival strategies for MF industry. What do you think is needed?

There are two things — regulatory issues and investors’ perception and value. The latter is far more significant. As of now, not only retail investors but business at large and FIIs are also down, not necessarily on India but on everything. We always talk of MF investments as long-term play but in the last five years BSE 500 has returned 2.7 per cent. I may have the conviction that now there is value in the market and it’s time to buy but it is very hard to make that case to an investor who has seen his money either go down or hardly grow over the last five years. That in my view is the single largest cause of industry woes and its not the regulatory issues.

In that case, would you say that issues of entry load, expense ratio etc, are secondary issues?

To give a fillip to the industry, tax sops are very important and government should do that. There are talks of expanding the RGESS, giving tax deductions under other sections and rejuvenating ELSS which I think makes sense.

There is nothing that you can do about markets and so tax sops and such reforms are the only things you can do.

Issues like fungibility of expense ratio and single cheque to the distributor is critical. On the entry load while Sebi is clearly against it and Amfi is also not pushing it, I am a little ambivalent about it but we will certainly not push for it. If it comes, we will use it but it will be like going back to a style of functioning that may not be in investor’s interest.

What is your view on pension funds, are you willing to take it up?

Look at it as competing against provident fund whose returns are guaranteed by the government. How can any non-guaranteed product compete. The investor has to take the risk and that is one more obstacle. No one is offering pension as it won’t work now. We will look at pension schemes if we believe it will deliver value to the investors and if we can make money on it and right now we don’t have a compelling case on either.

For sometime now your AUM is hovering around R 14,000 crore mark, are you planning for any inorganic expansion?

We don’t want to be stuck into the cycle of R 14,000 crore AUM and want to get closer to R 50,000 crore. We will never buy AUM and given the current price levels it does not make economic sense to expand by way of acquiring AMC. Also, there is no loyalty to brands and AUM.

Investors have lost money in equity investing. Do you see rebound in the near term?

Given the political situation and the global situation we don’t see any significant rebound in the next six months. High interest rate is not the issue, but there is huge amount of uncertainty on the economy, regulatory and on the government front.

Source: http://www.indianexpress.com/news/poor-markets-biggest-concern-for-mf-industry/974788/0