The Hindu Business Line : `More long-term investors are turning to equity funds'

THERE is a discernable appetite for equity funds that are clearly positioned in the market, feels the Chief Marketing Officer, Cholamandalam Mutual Fund, Mr Vineet Potnis. He also tells Business Line how the scope for equity products is expanding in India. Excerpts:

As a marketing head, are you noticing new trends emerging among users of MFs?

Yes. The most noticeable thing is the growing acceptance of equity funds as long-term investments. In the past, investors mostly considered equities and equity funds for trading or short-term opportunities. Growing awareness of how mutual funds internationally are used as vehicles of wealth creation and retirement planning and the good long-term track record of many equity funds have led domestic investors to believe in having at least a three-to-five years' time horizon for their equity investments.

In fact, systematic investment plan (SIP) is being increasingly adopted by long-term investors. Further, there is increasing participation from semi-urban and non-metro markets, especially so with more and more distributors in smaller centres getting the Association of Mutual Funds in India's (AMFI) certification. The expansion of new-generation banks and service providers like CAMS and Karvy into such markets is also making money transfers easy and efficient. Investors in these markets traditionally had high savings potential, a larger share of which is now being directed to mutual funds.

Is there a real preference for innovative products or is it mostly hyped?

Well, product innovation that addresses investment needs has always found favour with investors. In fact, there is a higher usage of efficient means of transacting — e-mail, bank transfers and phone. Technology has actually revolutionised investor servicing on a continuous basis. Electronic transfer of funds is not only presenting operational convenience, but also ensuring reliability.

Let me add that there is a growing number of financial planners with an advisory platform based on mutual funds. Simultaneously, traditional distributors are also catering to clients by acting as a supermarket. Planners are mainly serving savvy high networth individuals (HNIs), while traditional players are mostly attending to retail clients. Financial advisors typically charge fees. There is also a rising trend among distributors to offer advisory services as an option. Both the models are expected to co-exist.

Is marketing of funds becoming a relatively difficult proposition because investors are not easily influenced by debt funds any more?

It's true that debt funds have not been growing, as interest rates have remained uncertain, giving low returns to investors who had been getting supernormal returns in the last few years. During those years, investors allocated higher amounts to debt, which went against their logical asset allocation plans. In the last one year, they have been rebalancing portfolios, as their equity exposure continues to be very low. For conservative debt-oriented investors, funds have been offering alternatives like floating rate or hybrid products. More people now believe that the best way to benefit from India's economic potential is by investing in equities and equity funds.

Can you elaborate on some of the strategies that Chola MF has adopted recently?

We are targeting all segments - retail, HNI and corporate. On a geographical basis, we have seen increasing participation coming from semi-urban markets across the country. These markets are being tapped by appointing franchisees or representatives. The plan is to expand our reach by increasing the number of distributors and service centres.

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