The Hindu Business Line : `Fresh entrants will energise the industry'

MUTUAL funds in India are ready to offer `capital-protected' funds, not `capital-guaranteed' ones, never mind what some sections have been wanting so far. Mr A.P. Kurian, Chairman, Association of Mutual Funds in India (AMFI), makes it clear that asset management companies will be in a position to roll out capital-protected products, not anything else.

Excerpts:

Why is the MF industry keen on protection alone, not guarantee?

Investors should understand that there can hardly be any guarantees in today's world. What I mean is simple - it will be possible to protect capital but no formal assurance can be given in this regard. An investor will get back at least Rs 10 per unit if he chooses a capital-protected scheme and follows the rules. There will be no guaranteeing organisation to offer its services. The involvement of such an organisation, like say, a bank, will only lead to an increase in costs. This, we feel, is not desirable.

On the other hand, a protection strategy will not be too difficult to adhere to. A scheme will be able to preserve capital if it has the right structure and follows the right investment policies.

How many players are interested in it?

I do not have the numbers or even the specific names. However, it is safe to assume that quite a few of our members will be keen to make a foray into this area. The general belief is that the segment is going to take off well. It needs to be seen who makes a beginning.

I suppose it will be one of the leading players. The positive thing is that the uncertainty on this front is over. We hope to get the regulator's formal view sooner rather than later.

What does the future look in terms of new entrants?

Well, we have had some new names doing the rounds. In recent days, players like Aegon have expressed their desire. Their final views are not known at this stage.

Fresh entrants will energise the industry and provide competition to the existing funds. Automatically, there will be more variety. Investors will have more options. All this will bode well. Please note that conditions are getting better in the Indian market. Witness the recent decision by SEBI to allow five per cent reservation for MFs in initial offers. This will make a difference.

Can more consolidation be expected among MFs?

As things stand, there are a number of smaller players - those that do not compare well with the UTIs and the Prudential ICICIs of the world. Both are well over Rs 20,000 crore in size. The middle market too has a few names, all in the Rs 6,000 - 10,000 crore range.

We are not in a position to state whether or not such a situation will facilitate consolidation among asset management companies in the immediate future. In the recent past, there have been several instances of acquisitions, each spurred by specific reasons. Zurich and Pioneer are well remembered. Such developments keep on taking place.

How come some players are still not disclosing monthly portfolios?

The rule book is quite clear on this. Portfolios need not be disclosed every month. In fact, the regulator has distinct norms with regard to statutory disclosure. Fund houses that furnish regular, monthly portfolios do it voluntarily. The market seems to have liked the idea.

Some investors probably want to see this as a practice that all players should follow without exception. It is for each fund house to decide.

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