We have seen that the AUM of Sundaram Mutual Fund has increased 34% as on December 2017. What led to this growth?
Increase in the retail penetration has led to the growth. We have 94 offices across the country. Our presence in these locations helped us reach first time investors from far-flung areas.
Second, we have unique products that appeal to investors like Rural India Fund. The fund has seen tremendous growth due to good monsoon and government’s focus on rural infrastructure. The AUM of the fund has grown tremendously from Rs.150 crore to Rs.2,500 crore in over one and a half years.
Third, we have doubled the number of active distributors working with us from 5,000 to 10,000 over one year. Over the last couple of years, we have been meeting distributors to make them understand our philosophy. This has helped us grow.
Your annual report says that you have 34,500 empaneled distributors of which 6,080 are active distributors as on March 2017. How do you plan to increase the number of active distributors?
Many of the empaneled distributors are part-time advisors. In fact, many of them entered the advisory business during the 2007 boom. Hence, there are very few active distributors in the industry.
We have increased our engagement with distributors who are active and not working with us through trainings and knowledge sessions for IFAs. We have also provided IFAs with asset allocation strategies to help them understand its significance.
In addition, we incentivise distributors with competitive commission structure as we feel distributors are the backbone of the mutual fund industry. Currently, we are working on a technology platform for IFAs through which they can onboard customers through their mobile phones.
While many fund houses have stopped lumpsum flows in their small cap funds, Sundaram Mutual Fund has launched close-ended small cap funds. Your comments?
In an open-ended structure, the fund manager usually holds up to 70 stocks. However, the small cap segment has over 1,000 stocks. With the close-end structure, we can run multiple portfolios and provide a different experience to investors. There is no dearth of quality stocks to find and invest in the small cap segment. For instance, we run a portfolio with 150 stocks in our micro-cap series.
In addition, fund managers need not worry about liquidity in a close-ended fun. We can plan the liquidation over one year.
Our strong investment team of 20 gives us confidence to take exposure in newer and lesser known companies. We do not rely on brokers.
In FY 2016-17, your company launched Category III Funds and now Category II Funds. How have you distributed this product? How has been the response from the IFA community?
The response has been very good. We have raised Rs.800 crore through category III funds. We have raised around Rs.300 crore from Category II funds in the current year. For the distribution of AIFs, we generally tie up with a few key distributors and private banks.
With the TRI coming in, will it reduce the outperformance of the large cap funds? Why?
TRI is just one of the few factors. SEBI has restricted the universe of the large cap funds to the top 100 stocks. The third factor is the increase in the equity allocation of the provident funds through index funds. Therefore, the large cap funds may not be able to beat the benchmark as much as they did in the past.
What are your future plans?
We will be launching a number of close-ended alternative investment funds across the categories to cater to the HNI clients.
We also plan to increase the number of active distributors by 20%, from 10,000 to 12,500. We will continue to strengthen our engagement with them.
Increasing the allocation of large cap funds and hybrid funds into our portfolios is on our mind. Today 60% of our AUM is in small and mid-cap funds. We would like to decrease it to 50% and move closer to the rest of the industry. We are going to seek SEBI’s approval to launch equity savings fund, balanced advantage fund and large cap fund. We will probably launch it by June.
