The Hindu Business Line : We are waiting for the right opportunities: Quantum MF

Quantum Mutual Fund, the new kid on the block as far as asset management outfits are concerned, promises not to sell through distributors. That, Mr Arjun C. Marphatia, CEO, tells Business Line, makes it different from its peers.

"But it does not make things easy for us... not when we see fund after fund being distributed aggressively by intermediaries", he concedes even as he categorically states what every investor should know: Direct selling without the aid of distributors keeps costs on the lower side.

Excerpts:

With no conventional distributors, how will you sell your funds?

It remains a challenge in the backdrop of a system marked by frenzied activity on the part of distribution outfits.

What we have done is simple: distribution commissions have been kept out, so investors are sure that more of their allocation is being put to use.

Clearly, we are urging them to come to us directly.

This also means that they must break the old habit of going through intermediaries. And, as you know, this habit is really old, considering the history of distribution of savings and investment products in this country.

Is it a divergence from the usual industry practice?

It is. It is not that distributors do not bridge the gap between mutual funds and investors. But in the current format, their heavy presence results in certain costs.

This comes in the shape of commissions, including trail commissions, which are commonly paid to them.

This has become the norm in our market, a norm that is probably not paid the kind of attention it deserves. It is as if that the market has taken it for granted.

Your equity fund professes to appeal to the longer term investor...

Yes, we want unit holders to stay with us.

Quantum Long Term Equity Fund will not take sector calls. Instead, the fund manager's focus will be on specific stocks, which may bring about particular sector weightages.

Let me point out here that the portfolio should ideally have 25-40 stocks.

At the moment it has about 15 stocks, including such heavyweights as TCS and ONGC.

Mind you, we do charge a four-per cent exit load if an investor pulls out before six months.

This becomes nil if he or she stays on for a full two years.

You have not been able to invest much yet. How do you explain this?

It is true that over 60 per cent of the fund's corpus is parked in liquid assets.

Plainly, we are waiting for the right opportunities.

As to exactly when such opportunities will crop up is a matter that should not be speculated on.

The point is, we expect corrections in a few segments. And in a number of cases, significant value is yet to be unlocked.

Take, for instance, a company like Bajaj Auto, which should soon start to derive considerable value from its investment in its insurance joint venture.

Or consider Aditya Birla Nuvo, which has a latent telecom angle to it.

What are you introducing next?

We may consider a balanced fund and a tax-saving product.

In future too we will stick to our basic approach while trying to provide higher risk-adjusted returns.

It should be remembered that a bullish market such as this will easily eclipse the cost of collecting money through high-decibel NFOs.

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