Before deciding to invest, investors should evaluate rolling returns instead of annual point-to-point returns, says Ajaykumar Gupta, President and CBO, Trust Mutual Fund in an interview with MintGenie. He sounds optimistic when he says that there will be higher retail participation soon after the market stabilises.
He also reminds investors that this is good time to invest in fixed income instruments and also that one should keep a long-term outlook while investing in equity. Investors should make asset allocation based on their risk appetite while underscoring that sectoral funds are only meant for informed investors, he adds.
Most active mutual funds fail to match the returns of a benchmark index. Do you think investors should stay away from active schemes and rely more on passive funds?
Actively managed schemes will continue to outperform their benchmark and more so in the mid cap and small cap category. Rolling return analysis eliminates these biases and provides a more reliable insight in appraising fund performance. Hence Investor should consider looking at rolling return rather than annual point to point return. Passive funds will also continue to grow and be more owned by the institutional and HNI customers.
Now more and more investors are investing in mutual funds, including retail investors. There was an increase of 12 percent in retail participants’ contribution to mutual funds in the past one year ending Sept 2022. What do you think about this pace of growth in the mutual fund sector: is this adequate, or is there a need to do a lot more to woo prospective and current investors?
In last one-year markets have been very volatile and investors have not made money. That may be one of the reasons why we have seen lower retail participation. But if you look at the returns for last three years Nifty has delivered 15 percent. As the market stabilizes and financial literacy keeps on improving, we will continue to see higher retail participation.
The financial market is undergoing a lot of volatility, particularly amid the Ukraine war and global inflation. How do you think the markets will behave in the immediate future, and what impact do you see on mutual funds of this?
Ukraine war has pushed inflation far higher than what we expected, and it has created volatility. With most of rate hikes already priced in and portfolio yield of debt MF in range of 7.25-7.5%, depending on the investment horizon it is a good time for investors to invest in fixed income.
October has been a good month for equity, but I believe that investors should continue to invest in equity with a long-term view.
What are your plans at Trust Mutual Fund? What new fund schemes are in the pipeline?
The core of our investment philosophy “Limited ACTIV®” is to deliver consistent risk adjusted returns. In the last one year we have launched 5 debt schemes and moved to an AUM of ₹1,087 crore. We have plans to launch more schemes across categories to build up our product suite to meet investor needs.
To aid our expansion of product suite, we will be expanding our presence. We are currently servicing investors through 7 cities and by end of FY23 we plan to increase our presence to 15 cities. We have also planned to enhance our digital presence and customer experience.
In the immediate and medium-term future, what are the sectors — according to you — that can see an overwhelming interest from the mutual fund industry in terms of new schemes or of higher allocation of assets?
The broader categories will continue to attract higher inflow in equities. Sector funds are suitable for the more informed investors. We have seen few industry players launching sector funds, but the pace of launch has been slow. Investors however should not lose focus on appropriate asset allocation based on their risk appetite.