The Hindu Business Line : Fund managers help in creating awareness

It would have been easy for us to start this column by criticising, as other commentators often do (an act some of them repeated when the September-end figures were released recently), the mutual funds industry for directing its energies almost solely towards gathering more assets and not paying enough attention to the many issues that affect those it wants to reach out to.

That, of course, would have messed up your Monday morning and left you - once again? - with the thought that not everything is as right as some of the more vocal champions of the asset management industry would want you to think.

Instead, we would not play the role of the classic killjoy, the naysayer who says forever that MFs are actually forgoing a lot, the latest assets tally notwithstanding. Having seen them at work for some time, here is in broad terms what we think fundmen have really accomplished, especially in the past few years.

One, funds have helped a section of our seasoned investors, however, small that number is, to partially transform the way they used to save. No more fixed deposits with companies of all hues, no more CRB, Prudential, Lloyds, Duncans... no more investments in bland, boring instruments.

Two, funds have enabled first-time investors to test the waters through well-structured products. Some of them could have gone straight into stocks instead, which could have increased their risk. On the other hand, funds have offered them diversification, leading to, in a manner of speaking, de-risking of portfolios.

Three, fund houses have innovated on a number of fronts. Such innovations (some of these have had enormous impact) have ranged from the extensive use of liquid funds by corporates, introduction of smart cards in association with select banks, provision of Internet-based tools to investors and so on.

The one important achievement - we often tend to ignore this, but perhaps someone will trace it all out one day and write about it - is that MFs have helped increase general awareness about savings and investments.

It is not that this country did not have informed investors. In reality, many had considerable exposure to the capital market, either directly or through managed products. However, their numbers have grown in recent years and MFs have not played a small role on this count.

For fundmen, the last five or six years have been more momentous than the last four decades. The industry has seen a spate of takeovers, scandals, regulatory actions... there have been controversies like dividend stripping, a boom-to-bust phase for tech stocks, insider trading charges against star fund manager Samir Arora.

These days, thanks to an advancing stock market, investors are generating wealth quicker than we think. Good fund managers are hugely in demand, some of them are changing jobs every now and then. A lot of new product categories have evolved. Of course, all this would not last forever. However, it does seem that the party is just beginning.

A close observer will be glad to know that MFs have filed a host of offer documents with SEBI in recent days. Some, like DSP Merrill Lynch MF's Strategic Bond Fund and Reliance MF's Interval Fund, sound interesting.

Other players, including Canbank MF, Sundaram MF and newcomer Lotus too have worked out new products.

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

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