The Hindu Business Line : Funds' initiatives in investor education

IT is good to see the efforts being mounted by some of our leading fund houses to guide lay investors, and more importantly, dispel misconceptions that people often harbour in their minds. Recent attempts by the likes of UTI MF and HDFC MF are particularly worth mentioning. Both are very large entities — UTI MF is actually the No. 1 player — and their initiatives are worth talking about.

Consider UTI's effort at clarifying that low-NAV funds are not necessarily the ones that are better for investment purposes. Or HDFC's way of telling investors about saving for their children. The two, one would argue, are extremely rudimentary issues. However, these are certainly ones that must be addressed every now and then.

UTI has picked up an expert view on net asset values, which underlines the fact that NAVs do not always recount the complete story. Comparison between funds would require more than just these standalone figures; you have to know particulars like dates of launch, portfolios, the benefits announced in the past and so on.

HDFC has on the other hand concentrated on a few homilies. Your children, it says, need to understand the value of what you are trying to do. And a good way of doing this is to start early in life.

Some of the other players have also sought to drive home key messages. HSBC MF for instance has emphatically talked about regular, systematic investments. Sundaram MF has tried to convey major points by drawing a parallel with cricket.

And Templeton has told investors about the fixed-income market and strategies that may be adopted to get the most out of income funds. There are other examples, which have been evident in fact-sheets and other means of communications.

Do we need asset management companies to talk to us about what are obviously very basic things? The answer is a big Yes. Funds are, for a lot of common people, the most ideal vehicles for creating wealth. They do have a unique responsibility - educating investors about money. And you would expect them to do that job well.

In fact, you would also expect fund houses to stand united on such issues, and more significantly, commit more resources to investor education.

The MF industry would point out that joint efforts had indeed happened in the past. True, but there is need to do a lot else. The best way of doing it would probably be under the AMFI (Association of Mutual Funds in India) banner.

Similar industry bodies in other countries have done major work in terms educating the market. Picking up a few lessons from its counterparts would not harm the local organisation. Arranging more open sessions in the smaller towns, featuring local distributors and investors, could be a good idea to start with.

It would be important to particularly rope in the medium and small fund houses; many of them have loyal investors who put a big part of their savings in MFs. Added to this should be efforts put in by individual distributors/financial planners. The latter are a very important community because they serve as a connection between the consumers and the product designers.

Feedback may be sent to blcal@vsnl.net

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