‘Investors need to look beyond trailing returns’

HSBC Mutual Fund has witnessed substantial growth in assets under management (AUM) since acquiring L&T Mutual Fund, expanding its reach from a tier-I player. CEO Kailash Kulkarni highlighted the company's cautious approach to launching new funds, choosing to do so only when the product offers a unique value proposition or addresses a genuine market gap.

Over the past two decades, MFs have navigated market cycles, regulatory changes, and other challenges, witnessing a surge in the number of unique investors from 2 crore pre-Covid to 6.2-6.3 crore currently. The CEO emphasized the shift from push to pull marketing, citing examples like the launch of a pure consumption fund and an India Exports Fund, as well as adopting a distinct strategy in specialized investment funds that eschews direct equity exposure in favor of arbitrage and REITs, while maintaining a high-quality fixed-income allocation.

Kulkarni expressed confidence in the continued appeal of MFs to household savings, despite the modest returns of the Nifty and Sensex, pointing to double-digit returns in diversified mutual fund categories over one- and three-year periods. He stressed the importance of diversified exposure and cautioned against chasing past returns in mid- and small-cap funds, urging investors to look beyond trailing returns and consider their risk profile and investment goals.

The CEO stressed the need for simplified communication within the MF industry to educate investors on goal-based investing and risk assessment, while acknowledging the growing influence of passive funds and ETFs, which, while expanding, still rely largely on government investments. Despite the rise of passive products, Kulkarni remains optimistic about the future of active management, predicting a coexistence of both active and passive strategies as investors seek to capitalize on India's potential for outpacing major economies.