The Hindu Business Line : `Long-term investors are an uncommon breed even now'

THE one thing that worries Mr Prakash Diwan is the dearth of new investors with steady, quality money. Not too many of them seem to be coming into mutual funds these days, the CEO of the Bangalore-based intermediary Way2Wealth told Business Line in an interview.

Finding such investors remains a big challenge before fund houses and their distributors, he added.

"In fact, more action appears to be visible on the direct equity front, a situation that has been propped up by bullish trends on the stock exchanges," Mr Diwan observed.

Excerpts

Are distributors of MFs really that gung-ho as some quarters seem to believe?

I think the business of distribution has remained a pretty basic and simple affair for most players. For one thing, the requirements of a very large section of their clients have not changed much, although the realties have been drastically altered for certain influential segments.

If you are in the business, you will notice sooner than later that committed, long-term investors are an uncommon breed even now. This is not to say that only the same money has been circulating in the system... the quantum may not be the same as before but the people concerned do not seem to have changed significantly.

In other words, contrary to what one may be inclined to feel, the much-talked-about hordes of new investors ready to bring in fresh money into the system are not really evident. But some of the individuals in the fray, especially the financial planner kind, are doing quite well. It can be generally said that as things stand, more and more customers are accepting tailor-made solutions that satisfy their investment needs.

On the other hand, a number of corporate distributors, despite pursuing aggressive expansion plans, are yet to cover all geographical territories in the most effective manner.

But aren't equity funds attracting sizeable resources even from new investors?

That is true. But the situation may lend itself to a different interpretation as we go forward. Consider investors who have come in lately, attracted mainly by the recent rise in the indices and hoping that there will be further upsides soon. The market's last big move towards 6,000 points in the Sensex and beyond has already pulled along with it people who would have otherwise hesitated to participate. I am afraid that at 7,000 points - however premature that may sound - a whole new set of investors will be ready to troop in. And that may not be a totally happy scenario.

In fact, such an eventuality may turn out to be quite scary if you consider some of the wider ramifications. As the saying goes, a sucker is born every minute.

What are Way2Wealth's expansion plans?

We are moving into new centres on a selective basis. Equity broking remains a core business for us and the company plans to promote this activity further.

The market has been good and this has enabled us to record substantial response from some clients who were being already catered to. Retail volumes have certainly picked up.

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`Long-term investors are an uncommon breed even now'