'Higher fixed income returns is weighing on equity funds'

HDFC Asset Management Company was the mutual fund house of the year at CNBC-TV18-CRISIL Mutual Fund Awards 2012.

In an interview to CNBC-TV18, Milind Barve, managing director of HDFC AMC says, it feels good to win an award in the background of a year which has been very challenging. He further says, the assets of the mutual fund industry have remained more or less at the same level and equity assets under management have also remained at same levels of about Rs 2 lakh crore in the last two years. According to him, the real challenge for the industry is to convince investors to stay in a fund atleast for three-five years. Barve says, higher fixed income returns is weighing on equity funds. "I would say there is a little bit of shift into the fixed maturity plans. Some of it could definitely be from equities. Definitely fixed maturity plans have attracted attention in the last quarter, particularly in the month of March," he adds. Also read: Next big move in market would be upwards, says HDFC MF Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying videos. Q: Is it disappointing to see such lukewarm response from the retail investor category year after year, particularly on the equities side? Do see anything that will change that around in the near term? A: It feels good to win an award in the background of a year which has been very challenging. Point to point, the market is down about 10%. If you look at the last two-three years, the assets of the mutual fund industry have remained more or less at the same level and equity assets under management have also remained at same levels of about Rs 2 lakh crore. But contrary to what most people believe, year after year retail investors have continued to buy into mutual funds of the order of about Rs 50,000-55,000 crore. Last year, it was about Rs 74,000 crore. In this year 2011-12, it's slightly down at Rs 54,000-55,000 crore. So, there are gross sales, people are buying into funds based on their own understanding or as advised by their advisors are buying in. What's happening on the other hand, which is probably more of concern to us in the industry, is that during this last two year period we have had redemptions of about Rs 1,38,000 crore. Last year, we have had redemption about Rs 49,000 crore up to February. So, the concern in not so much as to whether retail investors are buying, it's more that there seems to be and I believe wrongly so trying to take short-term calls on mutual fund (MF) as an asset class and then probably just shifting from one fund to the other. It is for all of us in the industry to just take a pause and look back whether what's happening is right for the investor at all, is it right for the fund houses and is it right for distributors? So, you have seen market share shift from one fund house to the other, investors exiting a particular fund, buying into another fund. So, we haven