As a global leader in mutual funds, what do you bring to the table?
The Fidelity difference is the passion we put into our research. You could say we're obsessed with the details. In our view no other fund management company goes further to hunt down the stocks with the best potential to perform.
Research is our competitive edge and is the engine that allows us to pick stocks 'bottom-up'. We have 480 analysts around the world who do nothing more than investigate stocks.
And when I say investigate they're doing exactly that, this includes going out on the road visiting companies in person, talking to the management, walking around the factory or office and chatting to the staff.
As a result you get a real feel for the company before investing in it. We call it the 'kick the tyre' test. A company visit has often led to a fund manager changing his/her view of a stock. A balance-sheet only tells part of the story.
Fidelity contacts a company, on average every minute of every working day. Our fund managers makes on average 10-15 company visits a week. Here in India, our on the ground analysts have already seen more than 400 companies across the spectrum "� companies of all sizes in all sectors, looking for only the ones with the best potential to outperform.
Our focus on the long term, simple investment philosophy and investment in investor education has helped us grow in every country where we do business. We believe our Indian experience will be similar.
Can you tell us about Fidelity's experience in other emerging markets, especially in Asia?
Fidelity has a long and successful history in Asia. The Asian business started off with the launch of the Japanese business way back in 1969.
Since then we have broadened our footprint and are present in a number of countries including Hong Kong, Taiwan, Korea, Singapore and China apart from India.
We manage a number of regional as well as country specific funds in Asia. Our international business under Fidelity International Limited manages over $200 billion in assets of which about 15.8 per cent is invested in Japan and 7.3 per cent in South East Asia.
Indian investors have not been particularly enamoured by mutual funds given the plethora of assured return products in the country. How do you expect to make a breakthrough?
The availability of assured return products is slowly reducing. It is important for investors to understand that they make real returns only if post-tax post-inflation, their money has grown.
It has been statistically proven in many markets, including ours, that over time, actively managed equity mutual funds outperform most asset classes. It helps to think of risk as an opportunity. "Nothing ventured, nothing gained" applies just as much to the stock market as to other aspects of life.
Despite mutual funds having delivered decent returns over the last few years, they continue to be a significantly under-owned asset class amongst households. We believe that one effective way of increasing this base is through investor education initiatives.
The Indian mutual fund industry, along with the army of fund distributors, has come under the regulatory lens for widespread mis-selling of the product. What is your strategy to counter this?
Our clear investor communication programme, strategy of working with distribution partners who understand our philosophy and approach of doing business, and our focus on raising longer term assets allow us to stay ahead on this count.
Also, in order to protect the interest of our unit holders we have adopted global best practices that discourage active trading in long-term oriented products.
This is mentioned in the offer document of Fidelity Equity Fund. The offer document mentions that the fund and the distributors may refuse to accept applications for purchase especially where transactions are deemed disruptive particularly from market-timers or investors who in their opinion have a pattern of short-term or excessive trading or whose trading has been disruptive or may be disruptive for the scheme.
What are you doing differently from other mutual fund players which you think will help you build a more credible business?
We are investing heavily in our India research capability, building world-class infrastructure to serve our customers better, making investments in building our brand, focusing on investor education and building a product range that is driven by investor need than the other way around.
We believe that in the long run, quality execution and our focus on business ethics, investment performance, client service, and investor education will set us apart.
What kind of distribution support and branch network do you have currently? How do you expect to take it forward? How many distributors, branches do you propose to build over the next few years?
We have a well diversified client base from over 300 cities in India. These customers are serviced by our call centre hub at Gurgaon, Fidelity branches in the metros and a number of CAMS Investor Service Centres. We work with a number of banks, large and small distributors and hope to add more over the next few months.
I believe that we can achieve success by working with our distributors closely, increasing share from their current client base, helping them deepen their reach as well as broadening their client base. Over time this will allow us to get a larger share of their flows.
Where do you see Fidelity over the next three to five years in terms of its rank in the AUM sweepstakes, and also in terms of the multitude of product offerings?
We are committed to growing our business in India and expect to be a significant player in the long term.
As a privately-owned company we can afford to take a long-term view. We believe our sales will grow over the long term as we develop deep relationships with local distributors and as investor appetite for mutual funds increases.
Over time, we see ourselves having a full product range covering the fixed income and equity space.
Can you give us some insight into what kind of funds can an investor expect from Fidelity?
Over the next few years we will launch funds that allow us to compete in all asset classes. We will build products of scale than have a number of funds that are similar. In our experience this helps investors get the benefits of scale, and allows us to build a long term quality business.
As India liberalises further, we will have the opportunity to offer some of our global products in the domestic market. The products that we will be able to offer will depend on the regulatory regime. We have a number of global, regional and asset allocation products that may have investor appetite in India.
These products will allow customers to get the benefits of global diversification, as well as plan for their future in a more balanced way. Our Luxembourg-domiciled SICAV fund range comprises of many funds that would lend themselves to India authorisation should the regulations permit.
