The Hindu Business Line : Tough task ahead for Fidelity

Riches have wings. Sometimes they fly away of themselves, and sometimes they must be set flying to bring in more - Francis Bacon (1561-1626), Philosopher & Statesman

IF you are an investor in equity funds, one who is tired of some of the ways funds are being sold in this country, you will no doubt fete Fidelity's effort to attract serious and relatively sticky money, courtesy its newly-mooted growth fund. Now, `serious' and `sticky' are adjectives not frequently used in the big, bad world of equity products, so the attempt is worth more than merely a passing mention.

It is of course too early to state for sure that Fidelity will be able to achieve its goals in a reasonable span of time. However, it can well be suggested that more than a few odds are stacked against it - in fact, life may not be easy, at least initially, for the Fidelity team in India. And the reasons are quite obvious.

For starters, the new entrant will flag off its business when the equity market is at an all-time high. The indices are vaulting, mid-cap stocks are booming and many small-cap counters are gyrating hard. It is true that some quarters find the valuations a bit too stretched, while a few others are plainly waiting for Dalal Street to take a break, at least for a brief while, and begin afresh when stock prices turn more reasonable. But that may not happen in a hurry.

From the point of view of marketing, Fidelity will do well if it manages to keep away from some of the habits that have made their way into the realm of MF distribution. A few basic tenets need to be followed once its business begins to take shape in India. And the list of essentials should include a clear focus on investor communications - which will ideally require it to go much beyond what is mandated by the regulatory bodies.

A quick look at the offer document filed with SEBI will tell you that the proposed Fidelity Equity Fund will be a diversified scheme, one that aims to generate long-term appreciation of capital. It will maintain a broadbased portfolio, the performance of which will be benchmarked against BSE 200. The fund manager will follow a bottom-up strategy. There will be diversification across sectors, to be achieved with the help of 60-80 stocks; also, there will be no sectoral or market-cap bias, the offer document has pointed out.

On the face of it, this is nothing new in the world of asset management. As things stand, there are enough growth funds in this market - the list is long, alphabetically it begins with the equity product managed by ABN Amro MF and ends with those in the UTI MF stable. The Fidelity team will have to fit its own scheme somewhere in between.

That, of course, is just one part of the story, the easy part. The difficult bit relates to making a difference in terms of performance and service standards. Equally difficult, perhaps, is delivering on its intention to garner sticky and honest-to-goodness money, courtesy investors who are not interested in easy entry and exit.

With that in mind, Fidelity must brace itself for finicky people who are, as a community, becoming more demanding when it comes to both performance and service. After all, `hard to please' is a term that fits many of us so easily.

Feedback may be sent to nilanjan@thehindu.co.in

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