Your fund house has witnessed double-digit growth in the previous quarter in terms of AUM. What has contributed to this growth?
Our SIP book has doubled over the last one year. In fact, we have seen almost 50% growth in our SIP accounts since March 2017.
Another factor that has contributed to the growth in AUM is our clearly defined and simple products. As a result, our schemes such as Sundaram Rural India Fund and Sundaram Select Midcap Fund have grown in size.
Finally, the AUM of balanced funds of the MF industry have been increasing; we are also getting a good share of it. In fact, our fund has grown 7 times in less than a year.
It is been over two years since you have become the CEO of the fund house. What changes have you made so far?
I have been associated with Sundaram Mutual Fund for the last 12 years. Becoming the CEO was a reward for the commitment and hard work.
After I joined Sundaram MF, you can say that the fund house has shifted its focus to retail investors. We have 94 branch offices across the country. Each branch has nearly 200 distributors. We focus on distributors as they bring in retail clients to the mutual funds fold.
Another activity that we have started is increasing visibility through presence in electronic media especially through vernacular TV channels. This has improved our brand recognition in small cities and town outside south India.
In addition, you can say that I am a mobile CEO. I travel across the country to meet distribution partners. Distributors especially in small cities such as Baroda and Bikaner require training and motivation from the mutual fund industry. It adds a lot of value to them if a CEO goes to these places and address their concerns.
What is your roadmap for the fund house going forward?
We want to cross AUM of Rs.1 lakh crore over the next three years. We would leverage our existing distribution network to achieve this target. Our funds have been performing well and I hope that we would be able to garner healthy assets.
You have been advocating that the industry should attract people at the bottom of the pyramid. How do you attract people at the bottom of the pyramid?
We believe that IAPs are the only way to reach out to bottom of the pyramid. We think ‘mutual fund sahi hai’ campaign has created buzz among people. Now it the responsibility of fund houses and distributors to reach out to masses and explain to them the benefits of investing in mutual funds through ground level activities.
In addition, we plan to use digital media to reach out to young investors. We will come out with a digital platform by 2018 to cater to digitally attuned segment.
Post GST, many Maharashtra based IFAs have reportedly discontinued doing business with as you are Chennai based. What are you doing to revive contributions from these IFAs?
We knew it was coming and we got registered in Maharashtra before the implementation of GST.
How do you plan to deepen your engagement with distributors?
The best thing for distributors is to provide them asset allocation assistance. Distributors deal with investors having varied needs and risk appetite. Though large distributors have the requisite tools to do asset allocation for their clients, an IFA does not have such a facility.
To begin with, we have come out with a simple combo product called SIRFF in which we have bundled our equity schemes such as Smile, Infrastructure, Rural, Financial and Focus. This is a combination of large cap (Focus). Mid and small cap (SMILE) and sectoral funds like rural, infrastructure and financials.
Through this combo, investors can set up an SIP of a minimum Rs.5000 in our ultra short term. We then set up an STP on these five funds with an allocation of 20% to each. The combo is meant for investors with high risk appetite.
So far, we have received 5000 applications in just three months. We are planning to launch similar combo for aggressive, moderate and conservative investors. We will also allow lump sum investments in such combos.
Some distributors allege that AMCs are trying to bypass them by promoting direct plans. Your comments...
I think SEBI has been clear that they want fund houses to improve disclosure standards. This has inadvertently led to attract direct investments. We are not doing any specific things to promote direct plans.
However, we believe that distributors are the face of mutual fund business and they are the one who bring in long term retail investors to the MF industry. In fact, they help their clients avoid behavioural biases and irrational investment decisions.
SEBI wants AMCs to reduce TER. What do you think about the scope of reducing TER in mutual funds?
TER is a limit set by SEBI. It is SEBI’s prerogative to reduce or increase TER. Of course, if SEBI reduces the TER, commission of distributors will come down.
Currently, there are only 40 players in India having population of over 1.30 billion. We need at least 400 AMCs to cater to this humungous customer base. However, no one finds AMCs business viable considering the thin margins. Reduction in TER will further increase consolidation.
In my view, the industry can reduce costs by leveraging technology. Among other things are common application across fund house and uniform KYC for all financial instruments.
How would the consolidation of schemes help distributors and investors?
This is a welcome move. After consolidation, it will truly be ‘what you see is what you get.
As of now, there is no clarity on offerings. SEBI has given clarity on what comes under mid cap, small cap and so on. I have seen funds that started as mid cap funds for the first five years and are now multi cap funds.
Many experts believe that the consolidation will help mid-sized and emerging fund houses, which may not have a full product range. Your comments.
It is not about size. It is about quality of fund management. Quality funds will continue to attract money.
Since you have considerable experience in sales, how do you think the industry should attract more IFAs?
In my view, there are two ways to do it. First is to imbibe entrepreneurial mind-set among college students by adding subjects related to entrepreneurship.
Another thing that AMFI should do is to request UGC to include personal finance subject in BCom. Increased knowledge will encourage many people to take up mutual fund distribution.