Quality distribution, investor education key to mutual funds'

decided to chart his own course.

He started his own investment advisory and distribution company - WiseInvest Advisers. He intends to help more MF investors benefit from using WiseInvest, Rustagi told Business Standard. He also talked about what ails the MF industry and other related issues.

What ails the MF industry now? Why are funds still not very well accepted by retail investors as an ideal investment option?

The mutual fund industry has the potential of becoming the largest repository of nation's wealth but it has had its ups and downs. The growth of the industry has been erratic. A significant majority of investors have remained partially or fully unaware of the utility of MFs as an investment vehicle.

One of the major reasons has been the lack of focused effort on the part of the MF industry as well as distributors to expand the market. The fact that mobilisations from the wholesale segment dwarf retail collections is a testimony to this.

However, realising the need, the industry has stepped up its efforts to reach out to the retail segment. Also, investors are not really sure about what to expect in terms of returns from different schemes.

As of now MF investors are mainly concentrated in big cities. Your comment?

A It is true that the industry has been largely concentrating on cities over the years. However, there have been some valid reasons for that.

The industry depends to a large extent on third parties for most of its important functions such as investor servicing, collection and payment mechanism, distribution of products and other related functions.

For the industry to make an impact in smaller towns, it is necessary that the entities managing these functions have the required presence and the capability that matches with what is offered in big cities.

As the infrastructure required to make inroads into smaller towns is getting developed, the level of funds activity in these places is also increasing accordingly.

MFs are launching a number of products - How does this help the market? Are the right steps being taken to market the products correctly?

One of the hallmarks of the mutual fund industry has been its ability to use innovative approaches to tackle complex changes in the financial environment. By remaining tuned to investor needs, the industry has adapted and expanded its products on an on-going basis.

Today, mutual funds have the potential to fit into everybody's portfolio.

However, there have been times when investors were bombarded with a series of product launches within a short span, resulting in over-exposure in a particular asset class.

At times, even wrong positioning and aggressive marketing has been responsible for not so pleasant experiences of investors.

Then, there are those investors who still believe that investing in the initial offer improves their chances of earning better returns.

Clearly, there is a need to ensure that investors understand various attributes of mutual fund investing and benefit from this investment vehicle.

What needs to be done to enhance service? Is gradation of distribution houses a good option?

There is a need to improve the quality of advice. While Amfi's certification programme has ensured the seriousness and improved the quality, there is still a lot of ground to be covered in terms of gaining knowledge and insights required to become a more informed advisor. It is necessary that distributors understand products and their suitability to varied investor profiles.

They need to internalise that selling mutual funds requires competence in identifying and matching investors' needs.

Where does WiseInvest Advisers fit in all this?

Our primary mission is to contribute to investor's investment success through superior advice, high quality information and expertise.

In other words, we bring value to the investment process, not just for initial sales but throughout the investment's time horizon.

We follow an open perspective to our business. While we are consistent in implementing our approaches, we have never believed that one approach works best for all segments.

Therefore, we follow a diverse array of styles and have developed an ability to create and tailor our investment approaches to the differing demands of investors.