Avinash Satwalekar, president, Franklin Templeton Mutual Fund is happy that investors have continued to deploy funds during extreme volatile conditions in the past year-and-a half. He tells Kushan Shah that while bear markets are measured by months, bull markets last for years. Excerpts:
How do you assess the performance of the mutual fund industry in the last 18 months amidst the volatility and global uncertainty?
If we measure performance in terms of SIP inflows, the industry has done really well with inflows of about Rs 30,000 crores a month despite lower-than-expected returns which is a testament to the growing awareness among investors on the importance of long-term investing. The returns have not panned out primarily due to the underperformance of the markets and low earnings growth. I have always believed that bear markets are measured in months, while bull markets are measured in years. So, every few years, investors will get an opportunity to deploy heavy capital in the markets.
How can the Indian mutual fund industry unlock its next leg of growth to reach underpenetrated markets?
The aim of the industry should be investor education and providing a financial safety net. The industry has done well in the urban centres (India), but there are still parts of the country which has not heard about mutual funds as yet which need improvement in financial literacy. Regulatory measures like incentives to mutual fund distributors in B30 locations along with a collective effort from the industry and necessary government initiatives will be important to achieve higher mutual fund penetration.
The mutual fund industry has seen the entry of many new players in the last 1-2 years. How does Franklin Templeton AMC plan to differentiate itself among investors?
We aim to differentiate ourselves by focusing on products with a long-term investment horizon which provide disproportionate returns over the investment cycle. We also want to continue launching innovative products at the right time with the potential to make a difference to investor portfolios.
As Franklin Templeton enters the SIF space, how do you see these products adding value to investors who are already invested in other investment products like mutual funds and PMS?
SIFs have the additional option to take a short position which provides an additional source of alpha generation and risk mitigation. This allows investors to get disproportionate higher returns in flat or bearish market conditions or even rising market if the fund manager finds a company with weak fundamentals. This cannot be done with pure long only schemes.
What would be your advice to investors during these turbulent times?
I would say three things: stay calm, stay focused on your long-term goals and stay invested. It is not easy but if you do that, the probability of your long-term wealth creation goes up significantly. These are the kind of markets where investors can generate outsized returns over a long-term. Anyone can make a money in a bull market, but you can make serious money in a down market if you are willing to wait through it. This is why it is essential for investors to be non-stop with their SIPs.