RBI should revise the overseas investment limit by MFs

Nilesh Shah, managing director of Kotak Mahindra Asset Management Co. Ltd, believes that the only solution to the current volatility is asset allocation or a Kumbhakarna-kind sleep where you don’t worry about market returns. In an interview with Mint, the mutual fund industry veteran talked about the right way to approach the market, limit on overseas investment, and the underperformance in their flagship flexi-cap fund.

Now, we don’t know whether, in Ramayana, Kumbhakarna invested in mutual funds (MFs) or not, but if he had invested and he had seen his net asset value (NAV), he probably would have woken up. So, the only solution is asset allocation. There is no mechanism whereby one can protect the downside and get the full upside. The best that investors can do is asset allocation.

Balanced advantage fund is not the only answer. There are asset allocator funds, which divide between gold, debt, equity and offshore assets. Then there are asset allocator funds that divide within these asset classes based on a conservative, medium-risk or aggressive investor. But BAF is probably the first step in creating a solution where investors can divide between debt and equity. People necessarily don’t chase returns and they don’t like complexity. They want products which are simple to understand, and they want products which they can commonsensically understand. BAF is the first step, and then on top of it, investors can have an asset allocator fund, and then even a solution-oriented fund. BAF is meant for all those investors who want to take first step into asset allocation.