Gopinath Natarajan says that while fund expenses influence investor choice, he believes that both active and passive funds should be a part of an investor portfolio.
Most distributors like to recommend actively managed funds vis-à-vis passive funds? How do you plan to overcome this challenge?
Passive funds offer a great deal of diversification to an investor’s portfolio while being least expensive. In a scenario where a large number of equity funds have underperformed the market over the last few years, investment into Nifty ETFs would have been a prudent strategy. Passive funds play a key role in helping investors achieve the right balance between risk and reward.
We see that new AMCs initially launch passive funds and then go on to launch actively managed funds. Is it something to do with building acceptability in the market or is it because active funds are costly to manage? Will you launch actively managed funds going ahead?
Given the market conditions, active funds have not made too much of a case for themselves over the last few years while passive funds have managed to provide market returns at considerably less cost. We believe product offerings should not only be in sync with investor needs but should also take into consideration current realities.
How do you plan to differentiate your offerings from other fund houses?
At IIFL AMC our belief is to offer innovative products which not just fits into an investor’s portfolio perfectly but also carries a competitive cost quotient. This is clearly reflected in our offerings viz lowest cost ETF (IIFL NIFTY ETF) and first of its kind IIFL Dividend Opportunities Index fund.
How has been the response to your IIFL Nifty Dividend Opportunities Index Fund? Are you planning to launch any new ETFs?
There was a lot of traction from retail clients and we have collected close to Rs. 21 crore from approximately 16,000 investors who have invested in fund. We will be having a suite of products, catering to a wide spectrum of investor class in the future.
How have your own sub-brokers/franchisees taken to your products?
Our engagement with sub-brokers/franchisee segment has seen encouraging results so far. This is shown in the large retail participation in our IIFL Nifty ETF as well as IIFL Dividend Opportunity fund. Product innovation and cost competitiveness have also helped in creating critical ‘pull factor’ from investors.
Now that the expense ratio has been raised, do you expect to see investors interest in ETFs and index funds gain traction because of the low costs associated with passive funds?
While cost is an important factor influencing choice of scheme, it doesn’t play a central role in the overall allocation strategy of an investor. Active and passive funds have their own place in the risk/reward map bringing in effective diversification and hence can co-exist.
