Reliance Mutual Fund’s President and CEO Sundeep Sikka believes SEBI’s recently unveiled long-term policy on mutual funds would improve investor confidence. In an interview with Business Line , the head of India’s third largest fund house (with assets under management of over ₹1.03 lakh crore) feels mutual funds are best for first-time investors, given that fund houses are now offering every asset class. Edited excerpts:

SEBI’s recent policy on mutual funds seems to be dependent more on other entities (CBDT, EPFO and PSUs) for AUM…

We have to compliment the regulator for having unveiled a road map. All these steps will surely enable conversion of savings into investments.

We have a separate vertical for enrolling new distributors and new investors. For first-time investors, mutual funds should be the obvious choice.

Your take on SEBI direction on increase in net worth requirements and more disclosures…

It is about having your skin in the game. It will enhance investor trust and confidence. We are already doing voluntary disclosure of group funds deployed with us.

Why have direct plans not taken off?

They are for the savvy investor who knows when, where and how much to invest. It is less than 3-4 per cent of the business. The number might grow in five years. However, advisors are still very important for most investors to choose which scheme to invest.

What is the reason for poor inflows into equity schemes?

Over the last five-six years, there have been no substantial inflows into equity schemes, only redemptions.

A majority of investors have not made returns in equities after the Lehman crisis.

Over the last five years, the industry has been projected as a full service industry — all asset classes are now being offered. Fixed Maturity Plans are coming in from B-15 towns, which did not happen earlier. Though folios have come down and AUM is flat, many people are redeeming their investment with near positive or positive returns. We could have grown faster. We are trying to get more retail investors into income funds and liquid funds as a first step.

How have the asset classes performed?

Over long-term, it is equity. Long-term depends on an investor’s demographics and risk profile. Long-term is the time horizon until one does not need the money.

There could be blips in the interim just as the one after 2008.

How should one choose a scheme?

Look at a fund house with a good track record. The lazy style of ‘invest and forget’ is better than churning. One should not stay invested in more than seven-eight schemes across asset classes. Always go for long-term performance.

What are you focusing on?

Our focus will be to reduce the proportion of liquid funds in our AUM. We have 18 per cent share of liquid funds. We are also focusing on getting investors from smaller towns.

Our share of AUM from the top five cities is 60 per cent. We have 60 lakh retail investors with us across the country. In addition, we are also focusing on bottom line with our PBT at ₹228.1 crore.

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