Whenever the AMFI monthly numbers on mutual fund flows are released, there is a lot of data dissection which takes place. Too much crystal ball gazing about future trends is done on these monthly data numbers. Instead, let me attempt to see if I can decipher a financially literate investor’s frame of mind, going beyond just MF data numbers. This is basis interaction with several investors and advisors which has come across in the normal course of business.

  • An average investor likes to see predictability over the tenure of his investments. Of late, the element of predictability has eluded investors across the board. Whether it is credit risk in debt instruments or unprecedented volatility in equity/ hybrid investments, this is a new normal for most investors who have switched to financial savings from physical ones. Also, the overhang of the pandemic has made people crave for the predictability of low risk, low return instruments like bank FDs and/ or gold which is what one is seeing now.
  • Most “Robinhood” investors are comparing the returns made by their recent equity investments as the norm rather than the exception. This is increasing the tendency to self-manage money rather than being advised. Particularly in the MNI segment, one can witness this trend developing.

While one might argue that the above is short to medium term trends that will most likely reverse, there is a more interesting trend which one is witnessing currently.

A recent survey has shown that most investors have this uneasiness about not being advised to exit equity investments, which in turn has led to sub-optimal returns for them. This “Chakravyuh” is present across all asset classes, and investors rue not having the advice or foresight to move out of these assets when it is time to do so.

Very recently, “Value Shastra” a first of its kind asset allocation product was launched on the PMS platform by us, one of the key tenets being that it shifted investments from equities to liquid – and back – through an algorithm. While on one hand, the phenomenal back-tested returns that this product has generated over regular PMS offerings underpins the importance of the right exit and entry points, the encouraging investor and advisor response to this novel tool in PMS is testimony to the fact that it addresses the key need of even the savviest investors, on the other.

Indeed, this also explains the investor interest in the recent launches of asset allocation funds by most fund houses. This is a trend which is just starting to emerge in the Indian context, and it follows the investor preference for such funds globally.