In Vivek Reddy’s own words, ‘he is the first employee of the first private sector mutual fund in India’. Kothari Pioneer Asset Management Company (KPAMC) owes much of its success to Vivek Reddy, its chief executive officer (CEO).
Vivek Reddy has pioneered many a concept, the most important being that of daily net asset value (NAV). He also set the ball rolling by launching a slew of sectoral funds (IT, pharma, FMCG) that was later aped by other Asset Management Companies.
Under his able stewardship KPAMC has emerged as one of the most profitable and front-running Asset Management Companies in the country. An engineering graduate and an MBA from the University of California, Vivek Reddy was a management consultant in Los Angeles for four years prior to heading KPAMC.
We have interviewed Vivek Reddy in the past and this time around it was more of an update on emerging trends in the mutual fund industry, and our queries revolved around the initial public offering (IPO) scene, budgetary expectations and the brief rally that we are witnessing currently.
There is a firming up in prices of software stocks. There is a gradual 'delinking' between Indian stock markets and NASDAQ. What do you make of these developments?
This was bound to happen. As we had been maintaining all the while the dynamics which guide the US and Indian technology stocks are different. With a slowdown in the US economy and fears of a cutback in global IT spending, tech majors in US have announced scaled down growth forecasts which has resulted in NASDAQ plummeting. On the other hand, the prospects for Indian technology stocks continue to be good as they move up the value chain and benefit from increased outsourcing by U.S firms in search of more cost-effective providers.
What are your expectations from the budget for capital markets and the industry?
Our expectations from the budget are
- concrete measures to reduce the fiscal deficit
- spurring economic growth through infrastructure spending
- pushing reforms ahead to attract more FDI flows and to take PSU divestment to its logical conclusion
- provide further fillip to exports
Among the steps the budget could take to stimulate the capital markets are :
- withdrawal of distribution tax an dividends declared by mutual funds and corporates
- enhancement of the Rs.60,000 limit under Sec88; also removal of sub-limits under Sec 88
Increasingly fund managers are seen taking a very short term view on stocks. Do you subscribe to such an investment style? What is your investment horizon for stocks?
It is typically speculators and traders who take a short term view on stocks. Professional fund managers like us always keep in mind the investment objective of the particular scheme while formulating the investment philosophy. While long term investing is what we adhere to, one need to keep in mind the systemic changes, which affect the returns of the scheme. We tend to have a medium to long term view on equity investing and urge our investors to do the same.
At this point of time when stock markets are showing glimpses of a rally and the budget is a few weeks away, what is your advice to the mutual fund investor?
We feel that the investors should keep their individual financial goals, risk preferences and time frames in mind while investing rather than short term phenomenon like a rally or budget. Having said that, we feel that the investors should look to have a portfolio, which is diversified not only across sectors but also across asset classes. While the asset allocation depends on the individual risk preferences and time frame, we feel that a 70:30 allocation between equity and debt should be ideal for most investors.
The mutual fund IPO market has been witnessing a lull for some time now. What are your views on this?
Don’t be surprised if you find activity levels picking up in the mutual fund IPO market. If the number of offer documents filed with SEBI are any indication, we could see a lot of action here. But do keep in mind, as the mutual fund industry matures and the players complete their line up of products, IPO market become less important as fund houses concentrate on building their assets in their existing schemes.
Click here to read our previous interview with Vivek Reddy.