In your newsletter, you mention that all your 10 open-ended funds are ranked within Quartile 1 or 2 on returns in their respective categories on a one-year basis. What had led to this performance?
I think investment performance is the result of a disciplined approach. We reorganised our team last year with Alok Singh, CIO, heading the investment team. Our team is the key factor behind this performance. We have a stable team in sales, marketing and investment. I think stability of the team is important as it brings discipline and cohesiveness.
Alok has been a wonderful leader. We believe that going forward the returns will continue to grow.
As on December, 85% of the assets were in income and liquid funds that we believe is mostly institutional money. What are the reasons for subdued equity inflows? How are you planning to increase the equity asset base?
For this, I will keep the liquid fund aside. Non-liquid asset is our focus. Our corporate bond fund, BOI AXA Corporate Credit Spectrum Fund is one of its kind in the market. It is a pure credit fund and invests in different credit opportunities across the spectrum. It has performed really well. Its performance and its uniqueness have resulted in investor demand for the scheme. The AUM of the fund now stands at Rs.1,500 crore from Rs.100 crore three years back. That has been the major contributor to our AUM.
Equity funds are also on our radar. In the last six months, we have seen attractive returns delivered by our funds. Because of this, many distributors are noting our performance. We have witnessed growth in our retail AUM as well.
However, as we are a small fund house, large distribution houses do not recommend our products. For our smaller funds, we have seen that size does make a difference. However, in the corporate credit spectrum fund, we have seen large banks and wealth management companies recommending this scheme. If we can maintain the performance, then in FY 2018-19 we will see lot of distributors including IFAs, NDS, and banks tying up with us. We are trying to push our products through our third-party distribution services.
What proportion of your assets has come from distributors? How do you plan to increase business from distributors?
In the equity and balanced segment, roughly around 40% of the AUM comes from the non-associate distributors, IFAs dominate a major portion. However, in the corporate bond fund, big distributors, NDs and wealth management advisors contribute 100% of the AUM. As we have started to show performance, many banks are also willing to look at us.
How are you going about deepening engagement with IFAs?
Tying up with different banks is our prime focus. Hence, we are building our sales team. We have a team that takes care of clients from Bank of India and another one that handles third-party distribution.
Customer service is also another focus area. As our volume increases, good customer service becomes inevitable. We have offices in 13 cities. As we are a subsidiary of Bank of India, we have presence in many small towns through BOI branches. Currently, for IFA engagement, we are present in 13 cities and it is likely to increase to 18 cities this financial year. So overall, we have a reach of around 45 towns and cities.
Last June BOI AXA surrendered its PMS Licence. Many asset management companies are expanding their PMS and AIF services. Your comments.
We were always clear that our PMS segment would not be a traditional PMS product with discretionary and non-discretionary services. We want to garner offshore funds through the advisory model.
Currently, we do not have any plans to enter traditional PMS or AIF business. We are concentrating on the mutual fund business for a few more years. Once we see that our investor base and our distribution network have grown, we will take the call whether we want to expand our suite of offerings or not.
The AMC financial report shows that the company has suffered consecutive losses. How do you plan to revive the financial performance of the fund house?
If you see the reports, you will see the losses have been coming down over the past financial years. This is typical of any fund house. It needs six to seven years to break even. We are hopeful that we will be able to break even in 2018-19.
At a time when many PSU banks are reeling under asset quality issues and the sponsors are planning to let go their share in the non-core operations such as mutual funds, how do you see the future of BOI AXA MF?
It is true that the lending business of these banks is under stress and there has been some change in the shareholding pattern of some PSU bank backed AMCs. However, as far as the subsidiaries of these banks are concerned, we have not heard any PSU banks exiting their subsidiaries.
In our case, there has been no discussion about sale. It is a not a capital-intensive business. In addition, if we break even next year with increasing customer base, it provides many opportunities for our shareholders.
What are your business plans for FY2018-19?
Our target is to achieve an AUM of Rs.10, 000 crore until March 2019. Currently, our AUM stands at Rs.5,802 crore as on March 2018.
From the product side, we have sought SEBI’s approval to launch an arbitrage fund. We are hopeful that we will receive the approval shortly. There has been a huge demand for arbitrage funds. Many HNIs and institutional players look for arbitrage funds.
Recently we closed a mid-cap tax fund, which received good response from retail investors. We received around Rs.100 crore from retail investors. Given the appetite, we may launch the second series next year.
Also, the rationalisation of schemes opens up many opportunities for us. We would launch some funds based on our strength and where we feel there is a unique opportunity. There is also space for us to launch a pure equity fund.