WF: Industry AuM reached a new high of Rs. 8 lakh crores in Nov 09 - which few people would have predicted in Jan 09. Do you see the industry AuM crossing the magic 10 lakh crores figure in 2010?

Nimesh Shah: Our focus at ICICI Prudential AMC is on delivering on performance to our investors and managing the fiduciary responsibility give to us with efficiency. We believe that in the long run the focus on investor interest and performance will itself translate to AUM growth. Hence to reiterate we do not work towards AUM targets but towards delivering performance efficiency which provides long term sustainable outcomes.

WF: One of the biggest challenges that the industry is facing is that despite a sharp recovery in equity markets, net inflows are not coming into equity funds over the last few months. Why is this happening and what can be done to remedy this situation?

Nimesh Shah: The markets are currently at higher end of the fair value range . Hence investors could be refraining from equity investments due to speculation of a consolidation. Investors however need to be recommended to invest in equity based on asset allocation and not trade.

Hence in spite of valuations being ahead of fundamentals an asset allocation approach is what will generate long term portfolio returns. . Under this frame work, if an investor is overweight equities his portfolio - which is unlikely to be the case - he should book some profit and reduce your overweight stance in equities.. In case of being slightly underweight by equities, probably investors can afford to stay underweight equity for the time being and say I want time to market and if my call is right, I will invest in a correction in the coming few months. If investors are hugely underweight equity, you have no option but to do a systematic investment plan, and gradually increase equity exposure, knowing fully that there could be 10 to 15 % correction somewhere down the line.

This apart investors need to be constantly reminded that market timing is not relevant rather it is time in the market is what will generate returns. Constant advisory will help investors bridge the knowledge gap and take equity investments as an asset class for long term return generation.

WF: 2009 saw two big developments for the industry : the ban on AMCs charging entry loads and the emergence of stock exchange platforms for mutual funds. How do you see these developments from an industry perspective?

Nimesh Shah: There have been several regulatory changes aimed at increasing transparency and investor convenience. The retail investors were benefited with abolishing of entry load and introduction of investing through NSE and BSE Platform, giving them more convenience and providing improved accessibility. These changes are part of an evolutionary industry process. Our distributors/ channel partners continue to be an integral part of our business model and with the above changes their role will continue to evolve positively. Also all initiatives will have the end result of moving from a transactional relationship to financial advisory, improving efficiency and ensuring that all stakeholders i.e AMC 's , investors and channel partners become part of a more evolved ecosystem in the mutual fund category.

WF: What do you see as the big trends for 2010 - from an AMC industry perspective and from a distribution perspective?

Nimesh Shah: From the distribution perspective , online may increase the reach of the distribution fraternity by extending the bandwidth of mutual funds. Knowledge will become a key differentiator for the distributor whereby moving from transaction to advisory will help garner investor trust and participation. Going forward the newly launched platforms could have an incremental role to play albeit better clarity on processes and efficiency of deliverables is required.

From AMC's perspective, there is expected to be a consolidation of funds towards AMC with long term investments in the Indian Mutual Fund Industry and the willingness to invest in knowledge infrastructure development . Consistency of fund performance will be an important parameter while selecting the fund house.

WF: What are your plans for 2010 - products, investment management, distribution, communication? What are your key focus areas going to be this year?

Nimesh Shah: For us investment management is the key to this business and we have always focused on the same and in future we will keep focusing on the same. For distributors we have developed an online learning modules called Enrich which will help them to upgrade their knowledge or of their staff to help them give informed advice to the investors. In addition we have also developed a distributor platform which keeps them updated on their Business and helps them provide details to investors on 24X7 basis. On the product side we will continue our attempt at introducing relevant invest outcome oriented products whererever therer is need gap.

WF: A number of distributors have shifted focus to alternative products like company FDs and insurance. What can be done to get them to re-focus on mutual funds?

Nimesh Shah: Mutual Funds as an investment avenue cannot be ignored as it offers the best investment opportunity in Equity and Debt market. Due to regulatory changes there could be small change of business plans which once they incorporate they will start to re-focus on mutual funds. In our own way we are sitting with our advisors and re-modeling their business models to help them increase business accordingly.

WF: Some observers believe that flows from Tier II and Tier III cities have more or less vanished and that business is getting concentrated back into larger cities. Is that a trend you see in your business? How adversely have market penetration initiatives been impacted over 2009 and what can be done to enhance penetration into smaller towns in 2010?

Nimesh Shah: We believe India has unlimited potential and therefore we have increased our network to around 200 locations. It is true that because of push aspect of this product their was initial fall in the collections in Tier 2 and 3 cities, but we are now seeing the advisors coming back in these cities and things are changing albeit a bit slowly.

WF: Platforms have been one of the big buzz words in 2009. We have seen the emergence of stock exchange platforms, the joint CAMS-Karvy advisor platform FINNET and we have an AMFI platform in the pipeline. In parallel, we have a number of super-distributor platforms meant for IFAs. In 3 years time, what role would platforms have carved out for themselves? Do you see a trend of IFAs gravitating towards platforms?

Nimesh Shah: Platforms as a business have had its share of ups and down's in global scenario. As long as they provide value at a reasonable cost there will be a segment of distributors which will work with the platforms. Majority of them though will try to be independent till more clarity emerges.

WF: What are your key messages for your distribution partners as we begin a new year?

Nimesh Shah: India is poised for growth and progress . Mutual Funds as a category are an excellent vehicle for long term wealth creation and can serve as a catalyst to trigger an individual's progress . This cause however needs to be supported through providing the right advise to investors and leading them towards sound decision making processes. There is therefore a need to focus on fundamentals like moving beyond transactional relations to advisory , providing all round advisory on various investment avenues ,investment styles and asset allocation.

The industry has to continue on the mission of Investor education, so they can confidently participate in the Indian equity growth story. The often repeated low penetration levels need to be surpassed collectively by the industry by developing the markets beyond the larger town. SIP and Micro SIP mode of investment will play an important role in increasing the penetration. Efforts directed towards constantly improving the operational environment, bridging awareness gaps will help the category achieve the status of a preferred investment avenue for long term wealth creation. Ultimately the category has the potential to offer a favorable scenario to all i.e. investors , channel partners and AMC's through being a part of the growth catalyst .

We wish everyone a very successful 2010.