Financial advisers are still having a difficult time convincing clients to take investing in emerging markets seriously as concerns over corruption and corporate governance still outweigh any positive aspects of the strategy.
“Consumers’ perception of investment in India is there is no real structure, there’s extraordinary fraud, corruption, no regulation, and take it or leave it because it’s a punt,” Fiducian Financial Services senior adviser Allison Williamson told a dealer group briefing yesterday.
“That’s what we are dealing with at a consumer level and a client level.”
In response to Williamson’s comments, State Bank of India Funds Management chief investment officer Navneet Munot said the situation has been improving and the corruption that had existed in the past was not as damaging as it could have been.
Specifically he explained none of the alleged corrupt practices had led to certain industries becoming a monopolistic in nature and instead had achieved the opposite.
“The corruption in India has promoted more competition. So for example in regard to the telecommunications industry the regulators gave licences to as many people as possible so maybe some people paid money and got a licence when they shouldn’t have,” Munot said.
Aside from this point he highlighted the fact the government and the elected officials in India are making a conscious effort to improve all areas of corporate governance throughout the country.
“At state level the guys who are focusing on governance and growth are the ones who are being re-elected so democracy is working as well,” Munot said.
Fiducian Portfolio Services managing director Indy Singh said the market regulators are also doing what they can to eliminate corruption.
“When we started the fund [Fiducian India Fund] I spoke to the Securities and Exchange Board of India I actually found they had better regulation than even our stock market,” he said.
“In fact they name and shame company directors on their website if they’re fraudulent and put their photo up. We did not even have AML CTF (Anti-Money Laundering an Counter Terrorism Funding) in Australia so we had to go through such a rigorous process to get registered in India.”
