The Hindu Business Line : `Distributors should either shape up or ship out in 2007'

Mutual fund distributors may have to completely reinvent themselves in 2007, argues Mr Sandip Raichura, Assistant Vice-President, DBS Cholamandalam Distribution. He also speaks fervently about fund managers who are good at pursuing their own strategies.

"Over time, you will see the market allowing them the flexibility to deliver differently and deliver well," he states.

Excerpts:

Which are the major factors that will drive distributors in 2007?

Recent trends have shown that the average investor will require a new breed of advisors. The latter need to be trained across a wide variety of new age products.

This, combined with the fact that brokers and bankers are consolidating, and foreign banks increasingly becoming more aggressive, will probably put pressure on small agents to upgrade or move out.

Clients these days are more demanding - they need time, attention and quick execution. Therefore, distributors may have to completely reinvent themselves in 2007.

A bullish market, if it prevails, may even prompt them to either merge with others or professionalise in order to focus on core segments.

Do you agree that investors and their distributors should be doubly careful about volatility this year?

At DBS Chola, we have remained bullish consistently, even in the face of major market collapses. That stance remains.

The confidence stems not from irrational optimism but from an understanding of how the economics of the nation is changing and how the outside world is reworking its equations with India. I think we are in the middle of a very bullish market.

There will surely be short-term corrections from time to time, but the trend will remain up for some time to come.

Simultaneously, the risks in a relatively illiquid market remain high and we need to question our market posture every now and then and subject our opinions to hard data.

Will you now advise investors to actively book profits and even spread out their allocations over longer term debt?

No, I don't think we are going to ask investors to start booking profits now. There is a lot of optimism and buoyancy in the markets. However, we may slowly move into a relatively risky zone for equities if interest rates plateau and conditions for economic growth worsen.

We have been asking over-weighted investors to gradually move away from equities. The idea is to look for more clarity on domestic and international growth before we undertake a major revision in our recommended asset allocations.

Indications suggest here will be no shortage of NFOs and the `multiplicity of funds' issue will still rankle. How do you see this?

I think we are getting over-critical about this especially since the regulator is tightening the noose around excesses. The market needs new ideas and new marketing campaigns from time to time. MFs are also a business - trying to get attention and then deliver well.

I don't think these are launched just to keep agents happy. Instead, it is about gathering assets, which is justified. However, funds should ask themselves why they are launching a product.

A part of the blame for the bad reputation that NFOs have started getting is also on account of the way these are distributed.

MFs can actually impart much more education to investors in partnership with distributors. And over a period of time, you will not see NFOs being labeled bad. We have quite a few brilliant managers in the country who are good at pursuing their own strategies.

Sooner or later you will see the market allowing them the flexibility to deliver differently and deliver well.

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