The Hindu Business Line : Even a small fraction of PF corpus is a lot for AMCs: U.K. Sinha

Why should an employee keep on piling up his provident fund contributions, often more than what is obligatory, when a better method of saving for his retirement is a phone call away? Mr U.K. Sinha, CMD, UTI Mutual Fund, asks that question. "The limitations faced by the PF system are well known", he says by way of explanation.

He also dwells on a few other issues concerning the country's largest fund house.

Excerpts:

How does UTI MF see the PF situation in light of the latest developments?

The process of reforms seems to be taking time to move on to the next level. In the meantime, the restrictions that we are all aware of continue to hold sway. The corpus has grown quite a bit over the years. A portion of this may well be assigned to us every year.

Even a small fraction, say, Rs 10,000 crore, would mean a lot to those of us in the asset management business.

While we are not talking only about UTI MF here, we would like to particularly position one of our funds on this front. This is a product that has given about 12 per cent historically. Of course, its performance is linked to the market, but this compares favourably with what employees are currently getting from their PF contributions.

The argument that there is tax-efficiency involved also holds true in our case.

Some employees are known to be voluntarily putting in more than what is mandatory...

That does not appear to be a very good idea, given the relative merits of certain categories of actively-managed savings and investment products.

In fact, such voluntary contribution happens in so many cases, not excluding those in well-known corporations. And I am not talking typically about PSUs here.

Our contention is simple: Please think carefully before you start contributing more, and willingly too, to a system that has strong restrictions to contend with at the moment. These are after all long-term savings aimed at your post-retirement years.

You have hinted at a product rationalisation. What is the progress here?

We are thinking of paring the number of funds we have in our suite so as to bring it in line with current realities. This will also lead to better monitoring of our products. In a few cases, the funds in question have comparatively low AUMs.

In one or two instances, there are funds that follow similar investment strategies, say, with regard to mid-cap stocks. This is not to say that we are going to extreme lengths in order to bring about radical changes in the product line-up. In some cases, we do see merit in continuity.

Take, for example, our gilt fund. This, given the way the market has been moving of late, may be out of favour at this juncture. But it needs to be kept as it is. When the interest rate scenario turns, such a product will prove its worth again.

If you are talking about merging funds, how many are expected to be consolidated?

We cannot make exact references nor can we give a precise timeframe. All we can say is that a few funds will be examined for consolidation. There is a process prescribed by the regulator, which must be adhered to in each case.

The unit holders concerned must be given an exit window in line with the regulations.

Some mergers have already been done in the past and this too has to be seen as part of our policy.

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