| Damodaran: Leap of faith
Calcutta, Sept. 11: The bifurcation of Unit Trust of India (UTI) — aimed at separating its schemes in shambles from the relatively healthier ones — was perhaps the only way the country’s largest mutual fund could regain the confidence of investors, said UTI chairman M. Damodaran in an interview with The Telegraph.
“UTI’s performance in recent times was no worse than other mutual funds — in fact, better than many. Yet, for reasons of private ownership, private sector mutual funds are considered to be better managed than UTI,” Damodaran said.
“But our results speak for themselves,” he added, pointing out a report prepared by Value Research — an independent analyst — which rates UTI’s performance in the last quarter fairly highly. “Fresh sales of our schemes have picked up, and sales in the last two months stand at a remarkable Rs 827 crore,” he said.
“UTI has never been short of fund-management skills but it did not have the right atmosphere. The greatest achievement of my tenure is, the chief executive no longer manages UTI’s schemes.”
Damodaran said the only mandate that he set for himself when he took over as chairman was to “improve the atmosphere within UTI so that the available resources could be utilised properly”.
“That was about all that I could think of doing as the chairman of UTI, when I was asked to chair my first board meeting within 24 hours of taking charge.
“Today, UTI’s funds are managed by professionally qualified people, many of whom have the experience of equity research and working in UTI’s dealing room. Interference from people outside the fund management team is not tolerated,” he said.
“Besides empowering the managers, UTI has also introduced incentives for performers. Incentives are just as important as empowerment and UTI is arguably the first private sector mutual fund which rewards performance,” the UTI chief said.
Yet the government decided to assume direct management control of the schemes in difficulty, along with a sovereign guarantee to meet the shortfall in each of them.
“The schemes that are being taken out of UTI are technically speaking, fixed-income products, whereas the schemes remaining with UTI are true mutual fund products exposed to all market-linked risks.
“The separation of schemes along these lines should help UTI reposition itself as a professionally managed mutual fund and regain investor confidence,” Damodaran said.
“The press has been calculating the cost of the sovereign guarantee by adding up the current shortfall in the assured return schemes — which is a little over Rs 14,500 crore. But this is incorrect.
“The government has said it will meet the shortfall in each of the schemes being transferred to UTI-I as and when they mature. If the assets of these schemes gain in value, the cost of the Centre’s package will decline,” he clarified.
One of UTI’s key objectives now is to improve on investor servicing. This, the management feels, will give a fillip to UTI’s sales. “We have test-launched three touch-screen kiosks at our offices in Mumbai. Going forward, we intend put up more such kiosks across the country to make it easier for investors to access their mutual fund units.”
“In the long run, these touch-screen kiosks should work as automated teller machines, and investors should be able to even redeem units any time during the day without having to go to the investor service centres,” Damodaran said.