Why should an investor risk money in a fund at a time when PPF gives a risk-free 8 per cent plus a tax rebate?Retail investors must differentiate between equity and debt products. When people think of funds they only think equity, but there are debt funds that do better than the risk-free instruments too. In equity, look at the last eight years and often what is forgotten is that the individual investor would have done a lot worse on his own, as compared to a mutual fund. The returns issue gets wrapped up in emotions. Funds offer an expertise in investing and 80 per cent of the managed funds have outperformed the market. The real problem in India is the lack of an evolved intermediary class who can properly guide the retail investor. But advisors are commission-seeking and may not have the welfare of the customer at heart.There has to be regulation of the intermediary class. Today Sebi alone cannot police a country the size of India. There has to be some government agency to certify and police the intermediary class. What systems do you have at Kotak that the investor is given the right product?We are very careful with our advisors and about selling according to customer needs. Our advisors get the customer to define their risk profile and time frame of investment and only then a scheme is chosen. We have a sound system in place for customer redress and we rate customer satisfaction as a key issue. We have zero pending complaints. Performance vs Benchmark Scheme Name 1 yr return % Benchmark 1 yr benchmark return % K30 65.64 BSE sensex 48.47 KMNC 44.91 BSE sensex 48.87 K Tech 32.34 BSE IT 12.67 K Balance 41.93 Crisil Balanced Fund Index 31.36 K Bond Deposit Plan 13.55 Crisil Composite Bond Fund Index 9.7 How can an investor choose a fund?He should look at factors like transparency, operational efficiency and performance. The advisors need to communicate these to the customers. He should also look at the track record and consistency of performance. But a standard risk factor in a fund says that past performance is not a guide to future performance.Sure, but we are looking at consistency of performance. If the fund has done well over the last three years, there is a high probability that it will do so over the next year as well. If funds show sudden spikes of performance, it may be risky to invest then. What is your advice to investors?People tend to say that funds have lost money for me and blame the funds, but what you need to see is how would you have done if you had invested in similar instruments yourself. Retail investors with no expertise must take the fund route to the market. The mutual funds have been seen as a vehicle for small investors, yet in India the institutional investors get preference.I don't think it is an either or situation. There is space for both in the market. The key issue is to ensure that the fund does not discriminate one at the cost of the other. Institutional clients do give lower cost and we cannot ignore that. Also the load that is charged goes toward the agent commissions, typically the big ticket deals are done by the fund itself and therefore the load can be waived. But practices like divided stripping may penalise the small investor if the government withdraws the dividend benefit in the next budget.The government need not resort to withdrawing the benefit, it has other options, like extending the lock-in to one year instead of 90 days to get around the problem.
