The Hindu Business Line : `Aggressive investing in stocks is fraught with risks'

For investors who are used to conventional single-manager mutual funds, OptiMix may appear to be a completely new animal. The newest player in the country's growing asset management space has just launched a fund of funds (FoF), a product that Mr Ashvin Arora, MD, says will aim for finer diversification by investing in a clutch of specialist MF schemes.

"This should appeal to a first-timer in funds," he notes.

Excerpts:

How will you ensure your investors will get the best of breed?

The idea is to identify complementary styles for the basket of funds that we will ultimately have. These will have to be chosen with great care. We will try to develop a good understanding of the workings of the managers of the underlying schemes. The management will be done in an active manner. The portfolio will be adjusted keeping in mind the prevailing dynamics of the underlying schemes. The latter will be reviewed on an on-going basis.

For the investor, I believe, this will present a chance to obtain a mix of the best schemes.

What could be the possible risks?

The FoF that has been mooted will rely on the performance of its underlying assets. Returns to our investors will depend on a very critical factor - the efficiency with which we select the funds. Besides, there are issues like liquidity and fund size. Risks can emanate from sudden or drastic changes in underlying fund size. Liquidity flows are also important. We expect our customers to be aware of these probabilities at all points of time.

Why should investors want this at all when direct equities are so appealing?

Well, aggressive investing in stocks is fraught with risks and is certainly not for everybody. Experience shows that there is traditionally a great liking for debt products in this country. The conservative set of participants that they are, retail investors have always liked debt.

The FoF that we have conceived is very apt for such investors. If you are a first timer in the markets, a limited exposure to equity through a hybrid product like ours will be a good thing. And if you indeed want more from stocks, the 30 per cent equity plan that we have designed can be considered as well.

The FoF has only two equity plans. You could have offered many more...

It is true that we have provided a 15 per cent and a 30 per cent plan. There will be other products from our end through which we hope to provide greater choice to our target audience. OptiMix intends to come out with multiple solutions in course of time.

At the moment, we are sticking to our core theme, one that is based on the premise that sufficient value can be created from tactical asset allocation and underlying scheme selection.

How are you positioning Optimix Net?

This is a tool that distributors can use to improve their workings. They can, for instance, utilise it for capturing customer data. Or even for efficient back-office management. We hope the distribution fraternity will derive sufficient value from the service.

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