The Hindu Business Line : Need for strong association of MF investors

Have you ever considered sharing your experience with other investors in mutual funds in a formal manner? Have you compared notes with anybody else on aspects such as service standards, the nature of information that has come your way or the kind of response your queries have elicited from distributors?

Has a fund house ever called you to know why you did certain things - redeem your units, switch to another fund or simply rejected a new sales pitch?

For all the developments that have taken place - mind you, there is today a rapidly expanding product range and the total assets under management is mounting - investors have by and large remained a lazy lot.

True, some of them are forever talking to each other, perhaps exchanging details. However, that is a loose network, not an organised platform that takes up issues that investors often feel strongly about but are too hesitant to bring up.

Of course, there are instances of activism all right, mostly courtesy individuals or corporations which take up one issue or the other. Many of these, as fund sources often say, relate to bad servicing.

In other cases, there are entities that feel bitter because of relative underperformance.

We are not exactly discussing performance here, but there is surely a strong case for the formation of a national MF investors' organisation.

In fact, with more funds turning up, with asset bases expanding, with more investors entering the world of funds, this case was never stronger.

Sentiment survey

Cut to the findings of a survey (on unitholders' sentiments) released recently by ICI, the body formed by funds in the US. It is based on a randomly selected sample of 3,000 US households, 48 per cent of which owned mutual funds

Apparently, impressions improved for the third year in a row in 2006, following several years of a "declining favourability rating" that coincided with the stock market downturn between 2000 and early 2003.

More than three-quarters of investors familiar with MFs currently have "very" or "somewhat" favourable impressions of fund companies, up from 71 percent in 2003.

Here are a few other details:

* Investment performance has the greatest impact on investors' opinions of funds. About half cite fund performance as the most important factor.

* Funds' favourability rating rises and falls with stock market performance. Opinion ran lowest in 2003, the year in which the market decline bottomed out. It has improved each year since then, moving in tandem with the market.

* Investors are confident that funds will help them meet their financial goals.

Now, ICI is what we often call an `industry body'. This may be an uncharitable way of putting things, but such an organisation would perhaps be expected to take up issues concerning the fund management industry - not exactly those that concern you and me.

So, what happens when our account statements do not arrive for days?

What do we do when important details of portfolios are held back?

How should we react when switch requests are not met the way we want them?

These are questions for us to ask. When it comes to demanding answers, a strong association of MF investors stands a better chance. This formula has worked in a number of other areas.

Let there be a beginning.

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

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