Don't create a digital age where there is digital exclusision: Kotak AMC’s Nilesh Shah on technology in MFs

Shah added that there is a need to leverage technology so that one can cancel noise and provide “wisdom”.

When it comes to concerns for investors and mutual fund industry, Nilesh Shah, MD , Kotak Mutual AMC suggests that while technology plays an important role, we must also balance it out with convenience and support for investors who still prefer in-person interactions and may not be as digitally savvy. “We have to create a balance where I am able to cater to both. Everyone doesn't have smartphone. There exists both types of India. My technology should be such that it can work on both the sides,” Shah said. He was speaking as a part of a panel during the Global Fintech Fest 2024 in Mumbai on August 29.

Shah acknowledged the importance of technology within the mutual fund industry. “There is no option. Whether I am managing money, whether I am servicing customers, whether I am selling to customers, there is no option but to leverage technology and become more efficient,” he said.

Shah added that there is a need to leverage technology so that one can cancel noise and provide “wisdom”. Today, Shah noted that knowledge is provided thanks to "mutual funds sahi hai" campaign but added that knowledge alone is not necessarily wisdom. “We need to reach out to people,” he said. Shah added that in India If there is a need for technology, there is also need for human touch.

“We are not just one country with homogeneous set of people. We are one country with heterogeneous set of people. There will be some people who still want to fill application form, want to touch and feel. There is another segment of people who don't want to see or face, they only want to use technology. So my feeling is that we will develop a model which will have Udipi restaurants also and five-star restaurants also,” Shah added, highlighting the need to cover every segment of society through human touch, through human technology, and through technology so that one can ensure that Indians become financially stable. Shah also noted most people are still putting money into assets which are not producing real return.

“Bank deposits, insurance, pension funds, small savings and currency notes. 93% does not give you power to outperform inflation. 7% of investors say you can beat inflation. How can India become wealthy?  How do I reach out to this segment of people so that they can invest for better, invest for future and hence there is need to use technology but also within human touch in India every model,” Shah said.

On challenges for active funds

Shah also spoke about challenges for active fund managers in beating the benchmark. “ I don't have a choice but to add value to my customer to keep my job. But do I add value every day or do I add value over a period of time?,” he noted. Shah cited an example of the Hindi movie Amar Akbar Anthony. “In this market there is a stock like Amar bhai, the upright police officer – this is where business is good, fundamentals are good and valuation is good. There is Anthony, who is also good but has taken some shortcuts - stocks where fundamentals are good but valuations are expensive in order to outperform benchmark indices, he said. Shah said that many fund managers have taken a bold call to stick to good business, good valuations over outperforming benchmark indices by investing into good businesses, instead of chasing benchmarks.  “I hope eventually investors will appreciate that,” he said.