“I was walking around in a BigBazar store making shopping, when I saw a Cashier talking to a boy couldn’t have been more than 5 or 6 years old.   

Feeling a sense for GRATITUDE and not EXPRESSING it, is like wrapping a present and not giving it

A pregnant woman boarded a bus. When she noticed a young man smiling at her she began feeling humiliated on account of her condition. She changed her seat and he seemed more amused. She moved again and then on her third move he burst out laughing. She had him arrested. Then the case came before the court, the young man was asked why he acted in such a manner. His reply was: When the lady boarded the bus I couldn’t help noticing she was pregnant. She sat under an advertisement, which read: Coming Soon: The Gold Dust Twins. I was even more amused when she sat under a shaving advertisement, which read: William’s Stick Did The Trick. Then I could not control myself any longer when on the third move she sat under an advertisement, which read: Dunlop Rubber would have prevented this accident.

Contributed by Amit Jain 

“A clock which is stopped is right twice in a day” …….Contributed by Amit Jain

• The Indian Mutual Fund (MF) industry is expected to witness explosive growth over the next five years. A study by McKinsey & Company projects the MF industry’s assets under management (AUM) to grow at a CAGR of 33 per cent over the next five years, taking the AUM of the overall industry to nearly Rs 16 lakh crore, a four-fold increase over current levels. More than half a dozen new mutual funds are expected to join the Mutual Fund Club in India and by 2009 the Mutual fund industry is expected to cross 50 Asset Management Companies with lot of untapped oppurtunities available in the Indian Fund market. International and domestic financial firms are queuing up to launch mutual funds in India, lured by attractive fees and rising valuations in Asia’s third-biggest economy, and to counter the impact of a sharp fall in broking fees. At least six brokerages are awaiting regulatory approval to break into the 33-member Indian funds industry, assets of which are forecast to more than triple to $520 billion by 2015. With more and more of investment demand being generated in the country through sustained consumption and household savings there are ample oppurtunities for Indian Mutual Funds to scratch the surface. Players are tapping into rising savings as the economy booms and where double-digit salary hikes are common in sectors such as real estate, information technology and financial services. Oppurtunities are coupled with challenges and we feel the below mentioned factors have to be overcomed to tap the oppurtunities available for the fund Industry
            I perceive the following challenges facing the Mutual fund Industry in years to come
  Product innovation - The industry needs to come out with new products with market hedging capabilities which can enhance returns for investors as well as Asset Management Companies. There has to be increased level of sophistication in the products offered in the market. In order to obtain better returns for the investments, fund managers have to look towards more structured products and absolute return investment products to increase overall fund performance. For Example- We can have long term funds which tap the retirement money of individuals.
  Maintaining Right balance between Business and Compliance- There is an increased cost of Compliance and Risk Management with regulations and practices being benchmarked to international standards. Allegations of misconduct have led to rising regulatory standards around the world. The stricter regulatory standards pose a challenge to asset management companies, especially smaller firms lacking economies of scale. The increasing scrutiny of sales of funds is altering the financial relationship between asset management companies and third party distributors. The new environment for distribution will entail far more disclosure than in the past. In additional to regulatory developments, operational and compliance risk has become a top priority for traditional and standalone asset management companies as well
  Talent retention and Management- The global upheaval in the mutual fund industry seems to be taking its toll on the Indian outfits with many fund managers changing gears. Some have gone off to rival asset management companies, while others have started their own private equity fund. Managing and retaining the right talent will be a key challenge for the fund Industry
   Lack of awareness & financial education- Investor education especially in small town and cities and rural areas is woefully lacking. While AMFI has been making some efforts in this direction, it is relatively inadequate compared to the size of the investing population. More grass-root campaigns especially in rural areas need to be undertaken to popularise Mutual funds and their benefits. With the introduction of more asset classes like gold, real estate and commodities through the MF route, investor education will attain paramount importance in the future
   Challenge of penetration in country’s vast geography- This is another vexed issue that has been worrying SEBI and the finance ministry. It is reported that almost 80% of all MF collections emanate from six metros. This anomaly needs to be corrected at the earliest. While MF houses have been increasing penetration into small towns, they often find the business un-remunerative due to the poor image of Mutual Funds that result in poor collections. Lack of Investor education is an equally important factor responsible for low penetration
   Establishing Uniformity and common standards: The common bugbear of all MF investors is the amount of paperwork required to tackle purchases and redemptions. No two fund application forms are similar; likewise each fund house has different rules pertaining to switches, redemptions and loads. For the lay investor this means confusion and ultimately chaos. The introduction of the mutual fund identification Number (MIN) was supposed to reduce this clutter but scrapping of the same by the Finance ministry just added to investor woes. Hence, a uniform and common set of standards is the need of the hour.
   Need for Self regulatory Organisation (SRO)- This is by far the most important catalyst for the sustained and orderly growth of mutual funds in the country. In the current dispensation, Securities and Exchange Board of India, through its mutual fund department, is in charge of overseeing the MF industry. While this sounds good on paper, in effect SEBI is quite busy with its governance of the capital markets (and rightly so) and is thus playing a passive role as far as the MF industry is concerned. While SEBI has been pushing Association of Mutual Funds in India (AMFI) to convert itself into  a self-regulatory organisation, AMFI,  being a representative of Mutual fund is quite reluctant to do so due to the inherent multiple conflict of interest. There is a crying need for an independent regulator on the lines of IRDA which could understand the issues on hand and which could devote complete time and energy to the same.
  Managing Competition from new entrants- Low barriers to entry and increased competition from other asset Management Companies will squeeze returns and share in the Fund market in India. Though there is lot of untapped opportunity in India it will take its own time to unleash the potential
  Managing nuances of Distributor driven business- Since the fund business is primarily distributor driven enabling them to reach to common man, there is heightened possibilities of mis-selling. Today there is no restriction on multiple fund and insurance distributorship and as a result the probability of selling a fund with higher commission for the distributor is very high. Also the perennial problem of pass back of commission is a challenging task to handle
  Compliance with Global Accounting and Reporting standards- Down the years it will become imperative for the Fund houses to move to a more transparent and International accounting and reporting standards like IFRS (International Financial reporting Standards) and GIPS ( Global Investment Performance Standards). This will warrant higher Compliance and technical challenges. IFRS incorporate accounting principles familiar to investors worldwide which will encourage investor confidence in capital markets with various jurisdictions and financial reporting and this will further facilitate investment from both domestic and foreign sources of capital
  More use of technology- Unlike Equity Market, Mutual fund market is some what primitive in terms of technical infrastructure and settlement process. One of the key challenges would be to enhance the use of technology for efficient and seamless investor transactions between all the stakeholders like the Fund House, Registrar and the Bankers.
  Managing Competition from the Insurance Industry- Unit Linked Insurance Plans (ULIP) account for 80% of the Insurance business in India. They being similar in nature of Mutual funds the challenge is to face the competition both within Asset Management firm and Insurance Company. Though, Insurance firms require more Capital for each insurance policy sold and have more onus of social responsibility, the nature of the ULIP business is similar to the Fund business. It is a challenge which needs to be faced as a cohesive force
  Outsourcing challenges- Back office and Middle office outsourcing to specialist third party service providers is the ‘mantra’ of the day to drive cost effective returns. The industry is seeing more and more of outsourcing enabling them to focus on the core business and avoid fixed overhead and infrastructural costs. The challenge for the Fund houses will be to balance risk and outsourcing driven benefits.
           
  Internationally, in the Mutual Fund Industry I perceive transparency, disclosure and fairness in Fund Performance and Fund Investments as the Key challenges. After the consequences of the sub prime and the financial crisis in the United States, performance and creditability of international Funds is questionable.
  The top four challenges according to me will be:-
  v     To work even harder to maintain the framework of accountability towards the investors.
  v     To always accord the fair and equal treatment to the investors
  v     Continue to inform the investors fully and meaningfully about their fund investments.
  v     Most importantly, the challenge to be loyal to the interests of the investors whom they serve in trust and be deeply conscious of the obligations they assume as fiduciaries on behalf of the investors