The Hindu Business Line : `Variable fees will form the basis of all our offerings'

SAHARA Mutual Fund, Mr Arindam Ghosh, Chief Marketing Officer, tells Business Line, has a major task ahead of it: Persuading investors to accept variable AMC fees.

"This is a new concept. The market must come to terms with it", he says without trying to be overly modest about it.

Excerpts:

When it comes to variable fees, is the market convinced yet?

I think so. Remember, this is a first for the industry. We have told distributors about the concept and they seem quite sure about its merits. It is now up to the investor - I mean, the average customer - to actually decide after he has appreciated the point.

We believe that the idea of charging variable fees will inherently score over the normal industry practice.

Would it continue to feature in Sahara MF's schemes?

Yes, our next product will have it too. This will be a short-term debt scheme meant particularly for institutional investors. In fact, we have already received SEBI's approval for it. We hope to see variable fees emerge as an important plank in the asset management industry.

The fund in question, the one with which we are making a beginning, will aim to invest in stocks of companies that we think will create wealth in the long term. Variable fees will form the basis of all our offerings.

How have you defined variable fees?

The basic plan is to link our performance to the investment management & advisory fees we earn. This will be done on a day-to-day basis.

Two scenarios hold the key. One, net portfolio return is higher than benchmark return. Two, net portfolio return is more than nil. The fee is to be charged accordingly, provided that at least one of the two conditions is fulfilled.

Net portfolio return will be arrived at by subtracting third party expenses from gross portfolio return. In a situation where it is less than the benchmark and less than zero, no fee will be charged at all. However, if benchmark return is 0.2 per cent and net portfolio return is 0.3 per cent, then the maximum possible fee will be charged. Incidentally, the benchmark to be used by the fund in question is S&P CNX 500.

Your equity funds are still very small...

True. Considering the kind of money being handled by some of the other fund houses, what you say is not untrue. The size of our equity assets is about Rs 80 crore at the moment, spread over three schemes, including the newly-launched mid-cap product.

Overall, we have recorded a hefty growth in assets during the last couple of months. As on June 30, we had Rs 565 crore or so with us, a nearly 100 per cent increase over what we had during the previous month. Like all other fund houses, we are trying to tap investors with long-term resources at their disposal. The plan is to embrace sticky money.

Has the Sahara India group started investing heavily in Sahara MF's schemes?

Well, the group has its own investment norms to follow. And it takes decisions based on merit. We are targeting new customer segments and hope to penetrate new locations.

At the end, the retail investor should make the real difference. And, as everybody knows, traditionally Sahara, given its experience in para banking, has been close to the retail investor.

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`Variable fees will form the basis of all our offerings'