The Hindu Business Line : `Capital-protected options may emerge important'

MR SANDESH KIRKIRE, CEO, Kotak Mahindra MF, is not your aggressive fund man complete with a Page 3 attitude. He would rather speak modestly about tempering return expectations in difficult investment environs than loudly insisting that investors must immediately tone down their demands.

"Money will keep on flowing into equities because some of the other classes of assets are losing their relative attraction," he says in an interview to Business Line.

Excerpts:

Debt funds are still generally disappointing. When do you think will the trend be reversed?

It has been a case of simple arithmetic. Investors will not be sufficiently encouraged to allocate more to debt till such time it again becomes lucrative for them to do so.

During the times debt gave 15 per cent-plus returns, the market was happily pouring money into debt. Stocks, however, have now taken the lead in this regard, more so because the other elements are not so good any longer. It is difficult to say exactly when the trend will shift.

A lot of factors will have to come in favour of debt before a major change takes place. Till then, investors should consider ways of investing prudently and regularly in equities.

But are investors still coming into equity funds somewhat irrationally?

There is nothing wrong with the basic objectives that have been driving them towards these funds. Yet, there is a feeling that too much is being expected - that is, on the basis of very short-term considerations.

Also, we still find that some investors have remained confused with regard to certain very fundamental principles. Take, for instance, net asset values. I find that some people still believe that a fund with a lower NAV is necessarily a better option when compared to another with a higher NAV.

Now, it sometimes becomes difficult for us to dispel such myths. These are hurdles that must be crossed by fund managers sooner than later.

As for Kotak MF, is there scope for more innovations on the debt side?

While we already have quite a range - liquid, STP, long-term income, gilts - we will try to address investors' needs when these do arise. To that extent, capital-protected options may emerge important. I am of course referring to a scenario when mutual funds are actually allowed to launch such schemes. The foundation, as you know, has been laid already.

Once it is okayed formally, it will be up to the asset management industry to roll out the products on the basis of the groundwork.

Is there scope for consolidating, say, Kotak MNC and Kotak Tech?

Not really. Each of the two funds has a specific rationale. An investor, if he is adequately certain about the prospects of a fund, will enter it with the objective of benefiting from the fund manager's skills. And that holds true for all other schemes as well.

On another front, we are planning to come out with one or two fresh equity products. Infrastructure is a theme we generally like and there may soon be a fund from Kotak MF with infrastructure as the guiding principle.

Incidentally, with the introduction of funds like Kotak Contra and Kotak Global, our range of equity has expanded significantly in the last couple of years or so.

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