For most corporate investors the road to mutual funds passes through Mumbai-based Mata Securities. With a decade of experience in the debt markets, Mata made a humble beginning in mutual fund distribution in the 1999 targeting collections of Rs 50 crore but ended the year with a boastful Rs 1300 crore. That was when mutual funds were still not the preferred investment option even for big ticket investors and mutual funds had to be sold. Behind this success was the aggressive salesmanship of Sameer Kamdar, national head - mutual funds. Kamdar could easily put any institutional distributor to shame when it comes to garnering funds -- the firm has won the Chairman's award for best mobilisation from the country's largest mutual fund Prudential ICICI for five years in a row, a distinction no other distributor shares.
Currently, the firm commands around eight per cent share in gross fund mobilisations and about five per cent in net assets under management with various mutual funds. This is probably one reason Kamdar is not loath to being candid in his views on the industry be it positive or negative.
The man talks to the Smart Investor about industry issues and offers some tips on how to protect yourself from getting fooled by notorious distributors. Kamdar holds an MBA from ITM, Mumbai. Before joining Mata in 1999, he started his career as an analyst with an equity broking firm.
Can you tell us a few things that you evaluate when you advise investors on mutual funds?
When advising investors we try to construct their profile first. This may consist of identifying the nature of investment, tenure, returns expectations, risk appetite etc. Besides this, we try to identify the eventual financial goal like retirement planning, children's advanced study, marriage etc before constructing a tailor-made plan for each investor.
How relevant is the brand image of an asset management company for investors? Not all AMCs with good brand image have been ace performers.
It would be a fallacy to say that a good brand image does not play an important role in the marketing process. There are several AMCs which have capitalised on a good brand image and enthused a lot of investors to invest with them. Having said that, good performance plays the pivotal role in the decision making process of the investor. A great brand image is meaningless without good performance and vice versa.
What question should investors ask the distributor while buying units?
Investors should enquire about the antecedents of the distributor along with evidence of past track record. They should check for his financial qualifications. Asking for references would also be a good idea as it helps the investor to check with others on the quality of service provided to them in the past by the distributor.
Investors should particularly check the methodology used by the distributor to show various performance measures. Often unscrupulous agents twist the facts including time periods and rankings to highlight a particular fund where commissions may be higher.
Also, if the investor is being given a statement of performance by the distributor, then the same should not be blindly accepted at face value and should be verified for its correctness.
Investors should question their distributors if they find their portfolio being churned frequently which may damage their portfolio returns and enrich the distributor. Lastly, investors should always try to read the fine print in all financial documents which may sometimes conceal startling facts.
How has been your performance as an investor? Who are your favourite fund managers?
Dangerous question. I have invested small sums in virtually all flagship and good performing schemes of most AMCs and I must say that I am a satisfied investor. The key to good returns on the portfolio is to invest systematically and without market prejudice.
Although I personally don't believe in investing in NFOs, I have invested in Franklin Flexicap & Templeton Equity Income Fund along with Reliance Equity Fund and some others.
As a distributor it is self-conflicting to have favourites though personally, I immensely like to work done by Prashant Jain, Sukumar and the team at Franklin, Nilesh Shah and Madhu Kela.
What are your views on mutual funds launching new schemes? Mutual funds usually say they do so because distributors do not push existing products...
That's a bogey that I have been hearing from time immemorial. If that was the case then how come NFOs from fund houses like Fidelity and Franklin get sold even though their brokerage in existing and new schemes is the same.
Conversely, look at how the brokerages on fixed-income funds have crashed dramatically due to severe competition within the AMCs. How come distributor pressure to up rates doesn't work in this segment then? It is nothing but the fierce competition between AMCs that motivates them to pay high brokerages to suck in assets.
Would you like to see any legislation to ensure that funds are not sold the wrong way?
Absolutely. SEBI has already initiated the clean-up of the system by banning amortisation. I think distributors should be recognised as an integral part of the mutual funds business and they should also be roped in to include their views to produce meaningful and effective legislation.
Sebi's initiative to regulate distributors will lead to a regulated and efficient growth of the distribution business. More importantly, this would reduce the stress on AMCs which have to currently perform the conflicting task of generating business from distributors while regulating them simultaneously.
Do you think the money that is coming to mutual funds is here to stay?
There has been a paradigm shift in the investors mindset in the country. Systematic Investment Plans (SIPs) have taken centre stage which proves that investors now understand and appreciate the virtues of investing for the long-term.
We are at the tip of the iceberg and what we are witnessing is just the trailer of a movie where retail investing is about to explode with the growth in the GDP over the next few years.
Corporates investing in mutual funds is a good sign as it is invested with good asset managers in government and other safe and rated securities. Left to its own, it would again find dubious avenues like bill-discounting and inter-corporate deposits where many corporates have lost heavily in the past.
Though prudent logic would advise segregating retail and corporate plans differently (unlike now where they form part of the same portfolio) to stop one from impacting the other.
