Nilanjan Dey

AT 35, Shome Mukherjee is like any other smart urbanite acting his age, willing to experiment a bit with his investments. He is, as he openly admits, heavily into what is popularly known as the `accumulation' phase of his investing career.

But underneath those loads of attitude, you discover a studied ignorance of mutual funds. Talk to him freely and you will end up with the feeling that his attitude actually borders on the dislike.

Needless to say, Shome and his ilk pose a big challenge to fund houses, each of which is in a race to mobilise more assets.

That race cannot be won if serious efforts at educating all sections of investors are not mounted.

What we do not need is a mindless blitz of advertisements, conducted to coincide with the launch of IPOs or the announcement of dividends. Simple but organised attempts, carried out as a continuous process, will provide the kind of education that is so conspicuously absent.

What is the most sure-fire way of winning over potential clients, including the harshest critics among them?

That's easy to answer - MFs must convince people about their relative competence (vis-à-vis some of the other forms of savings) and simultaneously back it with performance.

Now that may not be such an easy thing to do, given the kind of returns that some funds have delivered in recent times.

Of course, the most recent numbers cannot all be written off as telltale signs of failure. Rational investors will be inclined to allow fund managers a decent span of time before they start expecting superlative performance from them.

Shome's beliefs, meanwhile, will continue to find takers. His sympathisers will refer to unfortunate incidents and examples that have plagued the world of asset management from time to time.

They will not be entirely wrong either - ethical issues did arise in the past, regulatory warnings did come about, risk management mechanisms did go wrong and MF investors did lose money in more ways than they care to remember.

There will be wild references to close-ended schemes that spawned big-time controversy and schemes that were managed pathetically.

There will be references to schemes that were wrongly sold as well. (Does any one still remember the neighbourhood FD investor who snapped up risky technology funds during the Nasdaq-led tech boom of 2000?)

Some of the critics will also invariably refer to sound investment decisions that turned bad because distributors encouraged them to `time' the market.

The point is critics such as these are probably the MFs' greatest friends. How? Well, fund managers can simply take their accusations into consideration, weigh them in their minds and work hard to ensure that mistakes made in the past are not repeated.

Yes, investors must be made aware of the products, especially some of the new-generation products that meet their expectations under changed market conditions.

Raising the level of awareness will one day pave the way for discerning investors who understand the difference between good and bad.

As always, AMFI, the association formed by fund houses, has a stake in this.

Feedback may be sent to nilanjan@thehindu.co.in

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