Morningstar India held its annual Investment Conference in Mumbai which saw a gathering of financial advisors, wealth managers, bankers and investment experts.  

Global Investing

A panel comprising A.Balasubramanian, CEO, Birla Sun Life Mutual Fund, Nimesh Shah, MD & CEO, ICICI Prudential Mutual Fund, S Naganath, President and CIO, DSP BlackRock Mutual Fund and Surjit Bhalla, Chairman, Oxus Investment discussed the opportunities for Indian investors in overseas markets. Nimesh Shah was bullish on the US market but said that lack of investors understanding of overseas markets had been a reason for the tepid assets growth of overseas fund of funds.

S Naganath advised investors to take a tactical allocation to overseas funds depending on their risk appetite. He said that investors can allocate a small portion of their portfolio towards overseas funds to start with. Overseas fund of funds in India manage Rs 2394 crore, a mere 0.33% of industry’s total assets as on September 2012, which is an indication of low investor interest for overseas funds. Overseas fund of funds are meant to provide diversification in investor’s portfolio.

Active versus passive

Ashishkumar Chauhan, MD & CEO, BSE, Rajiv Anand, CEO, Axis Mutual Fund, Sandesh Kirkire, CEO, Kotak Mutual FUND and Sanjiv Shah, MD and CEO, Goldman Sachs AMC talked about the pros and cons of active funds versus passive funds. Sandesh said that the ability of active funds to generate alpha (the ability of the fund manager to outperform a fund’s benchmark) will keep active funds popular among investors. Sanjiv Shah talked about the benefits of passive funds like lower costs and no fund manager risk. He added that investors had a misconception that ETFs are low risk products. “Investors are still buying market risk,” he said.

A member from the audience raised concerns over the fund manager churn in the industry and its impact on returns. The panel said that the industry is moving towards institutionalizing the fund management process to ensure that fund manager movement doesn’t affect returns.

Mukesh Dedhia, a Mumbai based advisor asked the panel as to why no fund house has launched fixed income ETFs to which Sanjiv replied that once the fixed income market become liquid, fixed income ETFs will see the light of the day.

Longevity Risk

Taurn Chugh Chief Distribution Officer, ICICI Pridential Life Insurance said that many people buy insurance for short term needs and there is a lack of focus on longevity risk. Stressing that people are living longer but not necessarily healthier and with healthcare costs rising 15% per annum, the need for health insurance is vital, he said. He recommended annuity products as being best suited for people to take care of their guaranteed post retirement income. He stressed on the need for people to stay on course as many a time, policy holders stop funding their insurance needs mid-way. Tarun highlighted that there is a mismatch between people’s needs, risk-appetite and solutions which the insurance industry needs to overcome.

Building a sound portfolio  

Vikaas Sachdeva, CEO, Edelweiss Mutual Fund said that any investor’s portfolio typical first starts with real estate and gold. “During the NFO boom, investors had the misconception that Rs 10 NAV is cheaper. Advisors need to keep things simple.” A member from the audience asked how can advisors charge fee if they build a simple portfolio. Replying to this, Vikaas said that advisors need to demonstrate the advantages of investing through them vis-à-vis investing on their own.

Fund managers bullish on Indian markets

The day ended with India’s top fund managers like Prashant Jain, Sankaran Naren, Kenneth Andrade and Sunil Singhania presenting their market outlook for 2013. Fund managers gave a bullish outlook on Indian markets. Prashant Jain of HDFC MF said that knowledge based industries like IT, pharmaceuticals and consumption based sectors are likely to do well in the next five years, adding that the current valuations provide good opportunity for investors to enter the market. The panelists highlighted concerns on the fiscal deficit and oil price dogging the markets.