The Hindu Business Line : A few tips from international funds meet

THE 19th annual meeting of International Investment Funds Association, the leading assembly of fund industry organisations in the world, is just over in the US.

Investors in this country can learn an important thing or two from its deliberations, presaged by the head of the Investment Company Institute, the body that represents the American mutual funds industry.

Take distributor regulations, for instance. For those in India who are calling for better regulations for distributors, here's some juicy stuff: "Fund investors rely upon the help and advice of banks, brokers, financial advisers, and an array of other intermediaries. The quality of the service provided by these intermediaries is a matter of consequence not just to their own customers but also to the sponsors of investment funds," is the considered opinion of the ICI boss.

The Institute pointed out that securities regulators worldwide share certain common concerns, while international organisations such as IOSCO are increasingly active in the fund area.

Further, funds are being generally seen as good vehicles for the average investor to take part in the securities markets, accumulate wealth and achieve long-term financial goals.

Fund industry associations, it is added, should try to identify more effective ways to promote greater understanding of funds. This will call for better public communications and media relations. On another front, people need to be told that funds offer multiple advantages. These include professional management, diversification, liquidity and an array of choice. Besides, there is a certain degree of convenience and investor service, all at a comparatively low cost.

Funds are, at another level, expected to help address a very critical issue. This stems from demographic trends over which there is practically no control. The reference clearly is to falling birth rates, ageing populations, growing number of retirees and increasing costs of living, healthcare and the like. Trends such as these render the "defined benefit" and "pay as you go" structures of many public and corporate pension schemes unsustainable, it is felt.

The solution - partly, at least - lies in shifting pensions towards a defined contribution mode and moving greater responsibility (for accumulating retirement savings) into the hands of individuals.

This, it is felt, leads to a "natural environment for investment funds to grow, because they are an ideal vehicle to help individuals save little by little, year after year, to meet long-term needs".

And for those who love trivia, here are a few factoids culled from the speech delivered by the head of Investment Company Institute (of the US).

* The fund industry is becoming bigger internationally; it now handles $16 trillion.

* The assets invested in retail funds worldwide today are three times what they were a decade ago. In the US, mutual funds hold more than one-fifth of all US corporate equities outstanding.

* Pension reform is now a common theme across Asia Pacific. In the US, Americans had saved $3.2 trillion in defined contribution plans, about half of which was invested in mutual funds.

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

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