CIO Panel

93% advisors say stop promoting monthly dividends in balanced funds

Wealth Forum Platinum Circle Advisors Conference, July 2017

The CIO Panel at the recently concluded 8th annual Wealth Forum Platinum Circle Advisors Conference was lively and interactive, with clear answers and perspectives on a range of relevant market and product issues. Here's a quick snapshot of the deliberations.


CIO Panel: NeeleshSurana (Mirae Asset), R Sivakumar (Axis), Mahesh Patil (Birla Sun Life) and Prashant Jain (HDFC). Panel moderated by Vijay Venkatram (Wealth Forum)

Issue No 1: Go slow on recommending midcap funds?


CIOs were shown highlights of the product confidence section of the Wealth Forum Advisor Confidence Survey conducted in June 2017. Leading IFAs expressed sharply lower confidence in recommending midcap funds and increased confidence in well diversified multicap funds.

CIOs were asked whether they concur with these confidence indicators. The short answer: concerns are not unfounded. Its time to reset investor expectations from midcap funds. Don't expect continued outperformance, don't expect more re-rating. Large caps may do relatively better in the medium term. Stay invested in your midcap funds, but don't go overweight on them now.

Issue No 2: Markets holding up on hope or conviction?

Concerns on continuous delays in earnings revival were tabled. The fact that revival hopes have been pushed forward 6 months at a time for the last 2 years, for one reason or another, were discussed. Last time it was demonetization, now we are being told to write off 2 quarters for GST implementation teething troubles. Question that was asked to the CIOs was whether markets are holding up on hope of earnings recovery or on conviction around earnings recovery.

CIOs acknowledged the concerns and expressed reasonable confidence in earning revival from FY19. WF Platinum Circle members were however not as convinced.


Live poll results showed that 55% of WF Platinum Circle members believe it is hope and not conviction that's holding up markets, while 45% believe it is conviction. Members from metro cities are more sceptical than non-metros (62% metro advisors voted hope vs 48% of non-metro members). Among zones, South is the most sceptical while North is far more convinced about this market rally being supported by fundamentals.

Issue No 3: Say "no" to duration and "yes" only to accrual?

CIOs were shown the debt fund confidence scores from the recent WF Advisor Confidence Survey and the bottom line message on duration and accrual funds, and were asked whether they concur with this view.


The short answer: Yes - for 3 year money, accrual is a better bet than duration, as there isn't much confidence in rates going substantially lower from these levels - perhaps another 50 bps over the next 12 months.

Issue No 4: Highlighting monthly dividends in equity oriented funds

Prashant Jain asked for a debate around highlighting monthly dividends in balanced funds and other equity oriented funds. WF Platinum Circle members were accordingly asked their opinion on whether we are creating unsustainable investor expectations by highlighting monthly dividends in equity oriented funds.


An overwhelming 93% of WF Platinum Circle members said "Yes" - cutting across zones, metros/non metros and age groups. There clearly is huge concern that we are setting ourselves up for big problems when the next market downturn comes, as it surely will, at some stage.

Prashant urged members to reiterate to investors that the underlying nature of the product does not change at all - these are equity oriented funds which will fluctuate with markets. While dividend strategies can be drawn up with a near term vision, investors must be alerted not to extrapolate current dividend payouts into the medium and long term - as there is no way anybody can assure this.

Prashant reiterated that he had specifically asked for a healthy debate on this topic for this reason alone - he wants to make it clear that the messaging into the market, the messaging to investors should not carry any unsustainable assurances or promises.

Members expressed concerns that sales teams of fund houses are not always on board with this message, and are quite happy to "assure" maintenance of dividend payouts for varying periods of 2-3 years.

Prashant Jain and Mahesh Patil unequivocally stated that all concerned must refrain from offering such "assurances" to investors, as the nature of the product simply does not allow for long term plans to be made on maintaining dividend yields at certain levels.

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