'Market corrections return shares to their rightful owners-investors, not traders'

Eric Wetlaufer, former head of public market investments, Canada Pension Plan Investments Board (CPPIB), and present managing partner of TwinRiver Capital

With the new investor on board, Shriram AMC has announced that it will launch its first non-equity overnight fund on August 17. Mission1 is backed by marquee investors, including Eric Wetlaufer, former head of public market investments, Canada Pension Plan Investments Board (CPPIB), and present managing partner of TwinRiver Capital. He shared his thoughts on Indian markets and the mutual fund business in an e-mail interview with MoneyControl. Excerpts:

Why did you pick Shriram AMC to park funds?

We selected Shriram as our partner because of our shared belief in building a modern, sophisticated, digitally-delivered platform. The

investment industry has suffered from being too heavy on jargon and complex products delivered through a system that has

greater interest in growing assets than in customer experience. Although sophisticated investment products can be highly engineered,

their attributes don’t need to be communicated in a way that confuses the investor.

How optimistic are you about the MF industry in India?

We are extremely optimistic—growing wealth through participation in the ownership of India’s most successful companies will only grow in

favour. Stock markets do have down cycles, of course. But investors with an appropriate time-horizon can see great success through a

patient buy-and-hold strategy in well-run mutual funds, offered at a fair price.

Rising inflation, continuing depreciation of the rupee against the dollar, and escalating oil prices‑how do they impact markets and

retail investor sentiment?

Although unexpected, rising inflation and falling exchange rates do contribute to investment uncertainty, I believe the bulk of that risk has been discounted by lower share prices, providing a good opportunity for long-term investors to add to their equity exposure. The intelligent investor watches sentiment closely and can add value by putting new money to work during periods of greater turmoil. Market corrections are important; they return shares to their rightful owners—investors, not traders.

What is your take on rising interest costs and its implication for the markets, in general, and the mutual fund business, in particular?

Rising interest rates and inflation are a net competitive benefit to companies which have locked in lower financing rates and sell products

at higher prices. Better management teams can manage inflationary environments successfully. So, on a relative basis, there are good

opportunities for active managers who can discriminate winners from losers. The mutual fund industry can find this environment

challenging, as values of their funds decline in the short-term. If funds are conservatively run and properly sold and communicated to end-investors, the better mutual fund companies can add value to their brand.