In Vivek Reddy’s own words, ‘he is the first employee of the first private sector mutual fund in India’. Kothari Pioneer Asset Management Company (KPAMC) owes much of its success to Vivek Reddy, its chief executive officer (CEO).

Vivek Reddy has pioneered many a concept, the most important being that of daily net asset value (NAV). He also set the ball rolling by launching a slew of sectoral funds (IT, pharma, FMCG) that was later aped by other Asset Management Companies.

Under his able stewardship KPAMC has emerged as one of the most profitable and front-running Asset Management Companies in the country. An engineering graduate and an MBA from the University of California, Vivek Reddy was a management consultant in Los Angeles for four years prior to heading KPAMC.

In a candid interview to personalfn.com, Vivek Reddy commented on the interest rate scenario in the country, the state of the mutual fund industry, the slump in sectoral funds and the reforms that he would like to see in the industry.

PFN: What is your view on the interest rate scenario ?

Mr. Reddy: After a prolonged period of volatility, the rupee and bond prices seem to have stabilized. This time around the Reserve Bank of India (RBI) intervened in a limited way and concentrated on increasing the dollar supply rather than tightening the liquidity. The favorable trade figures and the positive response to SBI’s India Millennium Deposits scheme augurs well for the markets as this will result in increased liquidity and an improvement in bond prices. Looking ahead, we see call rates easing out, although we are still concerned about the impact of oil prices.

PFN: What is your view on the mutual fund industry in the backdrop of the current market slump? How do you see growth fund investors reacting if markets show no signs of a recovery and fall further? What is your advice to the mutual fund investor right now ?

Mr. Reddy: Volatility in stock markets is a fact of life and for every fall there is a rise. If one looks beyond the short-term ups and downs, equities as an asset class have always outperformed over the long term. We believe that the Indian investor has matured a lot and the decent inflows into our equity funds during the current slump are a pointer in this direction. Given that downside is limited from current levels, investors would be well advised to hold on to their investments. In fact, they should be adding to their investments at every decline.

PFN: What do you have to say about the year-on-year performance of pharma and FMCG sectoral funds? Quite frankly even a savings deposit would have fetched better returns over the last 12 months. Do you believe fund houses had envisaged this at the time of the launch and are having second thoughts now ?

Mr. Reddy: Most of the pharma and FMCG sectoral funds have been existence for around one and half years. It is unfair to judge equity funds for such a short time period. When we launched our sector funds, we did so because we were confident of the prospects of these sectors and continue to be. We are sure that over a medium to long term period these funds will turn in good performances.

PFN: Earlier we witnessed the trend when every other fund was launching a software fund. Now we are witnessing a string of MIP launches. What do you see as the next product waiting to hit the industry ?

Mr. Reddy: Changing market circumstances throw up new opportunities. Moreover, the Indian mutual fund industry is still evolving. So launch of a slew of products is natural in response to investor demands and an everchanging investor environment.

PFN: Currently what kind of reforms are you looking forward to in the mutual fund industry ?

Mr. Reddy: One of the main reasons for the growth of US mutual fund industry which boasts of assets of $7.6 trillion (more than the bank assets) has been the regular inflows into 401(k) retirement plans. The Indian industry too will see a dramatic growth in size once the long-term retirement assets flow into mutual funds.

PFN: How are you placed in terms of net assets? Which product in your fund has maximum potential for growth ?

Mr. Reddy: Today, we are largest in the open end equity category in terms of both assets and investors. In fact one out of every four investors coming in to open end mutual funds chooses a Kothari Pioneer fund.

We offer investors a wide range of products, each offering a unique role in every investor’s portfolio. Our diversified equity funds offer access to quality stocks and should form the core of an investor’s portfolio. The sector funds on the other hand should provide that boost to investors who are ready to take risk. Income funds on the other hand provide stability and generate regular income. Money market funds offer high safety and liquidity. Finally tax saving products such as our Taxshield and Pension Plan can help investors save taxes and earn long term growth. So to sum up each fund meets a distinct investor need.

PFN: Who are the three persons who have had a profound impact on your life ?

Mr. Reddy: I don’t tend to follow people too much, and don’t really have a mentor or guru as a role model.

While teachers, friends, relatives and colleagues have all shaped me and I continue to learn form them, I would say my approach to life and my view of the world has largely come from my parents. They epitomize the values that I hold high – inner mastery and strength, an uncompromising nature, independence and non-interference, and a gentle way of dealing with people and situations. My parents represent the higher and spiritual aspects in my life.

PFN: What kind of books do you read ?

Mr. Reddy: Not too much of fiction or business or biographies. What I like instead are books or plays or philosophies, that offer insight into how people really are and grasp the richness and complexity of life’s situations, rather than present glossy, glorified and moralistic images of how people ought to be.

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