Mature MF investors


Mature MF investors are brave and prefer long term bets even in a falling market.

Volatility has always scared the wits out of a common investor who feels compelled to invest in mutual funds because money in the bank does not grow fast enough to even cover inflation. He usually gets jittery every time the market falls and the net asset value (NAV) of his units drops with it.

That may be changing. Fund managers and mutual fund sellers are spotting a mild but definite shift in attitudes to investing. Investors are now buying mutual funds with an eye on a longer, 2-3 year horizon.

The first signs of maturity were visible as the stock market swung wildly in May and then in June. Many investors, who habitually run with their money at the drop of a few hundreds points, hung on even when a sudden selling frenzy ravaged stock prices and NAV in less than a fortnight. The sensex lost nearly a quarter of its value from the peak within a few weeks.

Fund managers know that a falling market presents a good buying opportunity but are unable to take advantage if investors start redeeming heavily. Unafraid of redemption pressure they went on a buying spree, picking up stocks at steep discounts.

It helped that many funds also had surplus cash raised in new issues. Local funds bought equities worth nearly Rs.7,900 crores in May, more than half their net purchases in the whole of the 2005-06 fiscal.

A marketing officer, who has been selling mutual funds for more than 10 years, said that a major difference was made by distributions. They (distributors) have matured. They are now counseling investors better, telling them that equity funds should be a long-term bet, adding that though at a slower pace, his equity funds were seeing net inflows in spite of volatility.

Some experts believe that investors are no more mature than they were before. Mutual fund investors are not mature at all. About 80% of all inflows in mutual funds come through new funds offers instead of market purchases. That is not a sign of maturity.

CEO of Quantum Mutual Fund believes that it is a question of expectations meeting what is on offer. Investors were told that if they were looking for short term money, this scheme was not meant for them. The CEO reiterated that their company is value investor and suited for long term investments. The fund saw robust inflows when the market entered the bear phase.