MFs ready to join the party

MARKET HORIZONS 2004 PART-II

Mutual funds hope to ride on the booming stock markets in 2004 with a number of big players expected to enter the industry this year.

The relative shares of existing players will certainly change but the biggest challenge before the industry this year is to keep investors""emboldened by last year's 100 per cent-plus returns""happy this year too.

Pankaj Razdan, deputy CEO, Prudential ICICI AMC, says "More bank-sponsored and foreign players will be entering the market this year. But (existing) top asset management companies willl able to garner a bigger share of the customer base as they will have the capability to pour in more funds, put up better infrastructure and are able to educate investors."

Adds N K Sharma, president and CEO, IL&FS Mutual Fund, "If consolidation refers to relative shifts and changes in the industry - yes, that will keep happening, as it does in any industry. The players who are committed to the investor and who stay tuned to the times will prosper. The weaker players could, over time, be marginalised and be taken over." The new players expected to enter the market this year include Fidelity Management; ABN Amro and HSBC."

But there is one section which says the expected consolidation will be delayed. Says Rajat Jain, chief investment officer, Principal Mutual Fund: "Consolidation will happen in the industry but the process could be delayed as things have now started looking brighter for the industry. Thus, pricing could be an issue."

Ved Prakash Chaturvedi, CEO, Tata Mutual Fund, sees the need for new product innovation. "Going forward, both the bond and equity markets are likely to remain choppy and hence it is important that a proactive fund management style is adopted towards asset allocation. Thus, new products like dynamic bond funds and floating rate funds will come in focus."

The challenge before the industry is to attract new investors by taking a broader advisory approach.

Pointing out that equity penetration is a mere 0.83 per cent of the total bag of financial assets, Pankaj Razdan says that "Asset management companies will have to become more of solution providers rather than be product-driven. A lot will depend on value-added services."

Ravi Sharma, head of marketing, Birla Sun Life Mutual Fund adds, "Retail investors have already started switching from fixed income to mutual funds, which is clearly evident in the recent collections of monthly income plans by a number of AMCs."

He also added, "Products will continue to grow to satisfy consumer needs, but consistent performance will be the key factor in attracting investors."

First India AMC's country head, Arindam Ghosh, says, "The industry's growth has been mainly driven by institutional investments (so far). Thus there is a need to attract new investors. If the buoyancy in the stock market continues, more market-linked insurance products will find favour. Also, this year one could see more hybrid or dynamic products entering the market."