The Hindu Business Line : MF industry still at nascent stage

FOR all the changes that have taken place in recent years, the Indian market for mutual funds is still very nascent. Assets under management have recorded tremendous growth and so has the number of investors who save through MFs - both trends pointing to the kind of changes that have come to pass.

Despite all this, the market here has played host to a number of aberrations, not all of which has been corrected. Genuine investors, who can be generally considered well-wishers of the industry, have taken pains to point these out, often at the cost of speaking out against those who want such aberrations to perpetuate.

In the past, there have been instances of bad governance in MF circles, ones that have adversely affected investors, especially the small unit holders. The latter have frequently borne the brunt of actions that have gone in favour of big, institutional investors.

The point is, there is virtually an army of small investors out there, compared to the select class made up of HNIs, corporates and institutions. Fund houses are not expected to ignore the retail side of the business, not when it can provide them with the desired volumes.

The retail side, however, is not easy to service. At any rate, it is the wholesale customers that account for the bulk of the mobilisation. MFs, therefore, devote considerable time and energy to cater to such patrons.

MFs need to realise that every time a genuine complaint comes to light, the case for savings through funds gets weaker. Investors are forever scared of losing money and tend to move away when systemic weaknesses and other deficiencies hit the headlines. Regulatory action, which may not be delivered on time, does not always help in bringing adequate relief. An aggrieved investor is an unhappy investor too.

It is true that unit holders are most worried when the market falls and their capital gets eroded. However, their concerns can stem from a lot of other areas, ranging from over-concentrated portfolios to non-receipt of redemption cheques. Even simple things such as non-receipt of account statements can cloud people's opinions. All such issues must be handled well by the MFs.

Let us at this stage consider what one of our readers, Mr N.K. Raveendran, has to say on a crucial subject - the difference that exists between a market that is mature and one at its infancy. While the authorities in India have indeed tried to educate the investor fraternity in various ways, plenty of work is yet to be done. And, SEBI and AMFI must be vigilant on this count, he notes.

By now, you would be wondering why we need to quote him. Simply permit us to suggest that he speaks for many others of his kind. In fact, this retired finance professional also stresses on the need to create strong groups of MF investors.

"In a mature market like US with close to 100 million MF investors and investment close to 6+ trillion USD, the investor association acts as a strong check and balance. I am not saying that it would prevent huge scams (currently brewing there!) but it will minimise such instances and help improve investor confidence", is his considered opinion. Any takers?

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