IAIP organized a Speaker Event in Chennai on June 7th 2013, wherein the T P Raman, Former MD of Sundaram Mutual Fund, gave good insights into the history and present state of the mutual fund industry in the country and what could be done to revive interest in the same. The event was well received by the members.
After giving perspective of how the mutual fund (MF) industry landscape was in 1997 when Sundaram entered into this business, Raman talked about the role of distributors and issue of mis-selling of products. Examples include an MF agent selling a sector fund to an 80 year old person. The fund houses too have not been coming up with simple products; complicating matter by various flavors that are not all that different, but only creates confusion for the agent and end buyer. He said that the size of MF industry is too small and excluding debt it is quite pitiable.
With the recent global financial crisis and poor investment performances, regulators worldwide have come under attack too. As a result they have become more alert and active in protecting investor interests. Currently, industry is seeing new circulars very frequently and is getting over-regulated; thereby stifling growth in asset under management.
Another reason Raman suspects is that people still have a gambling tendency with stocks and feel MFs are a get-rich-quick and not a long term investment asset class. Investor education is required but somehow it has not happened. Also, people prefer properties, gold and things they understand rather than the complicated contra/opportunities or theme oriented funds, which on the contrary make them intimidated.
Raman did have a few solutions. One was that fund houses should simplify their offering, educate the agents, distributors and investors. He also felt that poor performance comes from sudden large withdrawal of funds that puts the fund manager in a difficult situation. Lock-ins would help, but disciplined approaches such as a SIP will greatly help fund houses deliver good results as the input and output streams are predictable and they can plan the investment rather than scramble to ensure redemption.
The event closed with Q&A session and Sridhar presenting a memento to Raman and vote of thanks.
Contributed by: Meera Siva, IAIP Volunteer