L&T MF has been growing exponentially. Over the last one year, your fund house has grown 60% while the industry AUM went up by 20%. What has contributed to this growth?
We had sown the seeds of this growth much earlier. In fact, the outperformance is the outcome of, creating our own expertise in the fund management business. We developed a suitable philosophy to deliver consistent fund performance and grow business. Over the years, we have consistently explained to distributors who we are, what we offer and what our strength is.
In my view, three things have helped us achieve this growth.
- We focussed on strengthening our existing offerings, and looked at NFOs only if there is a gap in the existing fund offerings.
- We worked with a diverse set of customers and distributors
- We delivered consistent fund performance across years
We never subscribe to the view of making a fund ‘hero fund’. We have managed to attract inflows in all our existing open ended funds. A few years ago, just two of our equity funds had assets over Rs.1000 crore. Now, we have just two funds having less than Rs.1000 crore AUM.
Share with us three of your key initiatives that have helped your fund house grow.
Our focus on building an SIP book has clearly helped us grow. We are not just focussed on SIP numbers, we also monitor our SIPs very closely. For instance, we -diligently track the termination of SIPs by finding out the reasons for discontinuation. While some SIPs are discontinued due to technical reasons such as cancelation of bank mandate or signature mis-matches in cheques, others are terminated due to short term focus. We work with our partners to rectify these issues.
Over the years, our SIP book has grown from Rs.24 crore in FY 2013-14 to over Rs.400 crore in FY 2017-18. Also, our SIP accounts have increased from 8 lakh in FY 2013-14 to 30 lakh today. Currently, we have 20 lakh customers doing SIPs with us. In fact, L&T Mutual Fund now accounts for 11 percent of the total number of unique customers.
Another key initiative that has helped us grow business is building a strong distribution network. We focus on few key parameters-; which includes, giving insights to distributors on products; help them with business development tools; and provide inputs relevant to them. In addition, we prefer working with a diverse set of distributors - banks, NDs and IFAsWe have 18000 distributors working with us today.
Finally, our true to label philosophy has helped us gain trust among distributors. You will be surprised to know that we did not have to make any major changes to our offerings post scheme recategorization. Distributors appreciate this and they are comfortable doing business with us.
Currently, we have 58% of our assets in equity funds and 42% of assets in debt funds.
What is your roadmap for the fund house three years down the line?
We do not have an AUM number in mind, however we would like to grow our market share by continuously growing our SIP book and number of customers. AUM is just an outcome of things you do. Our focus is to mobilize assets for long term.
How are you going about increasing engagement with distributors?
As I have mentioned, we focus on 360-degree engagement with distributors which includes enhancing their knowledge, product outlook and provide them with relevant inputs and information. Apart from giving them timely inputs crucial to their business, we also help them grow business through knowledge events. For instance, we have recently conductedevents on using excel to manage clients; and generating leads on Facebook. Similarly, we also provide our distributors insights on products through infographics.
We also stay in touch with our distributors through regular meetings. The sales team is encouraged to meet more distributors every month, rather than focusing on a few.
In addition, we hold two events a year for distributors wherin we invite experts to share their insights on economy, politics; and motivation sessions for distributors.
You have considerable experience in sales, how do you think the industry should attract more IFAs?
Compared to the insurance industry, which has 20 lakh plus agents, we have just one lakh plus distributors. Clearly, we have not really managed to attract people to take up mutual fund distribution.
In my view, we should tell them the power of trail
commission. Trail income is like pension income for distributors. We should spreadawareness amongst people that they can make a lot of money through trail income. However, we first need to clarify to them that they have to give at least 3 years of hard work before making money in this business to ensure longevity.
What will be the impact of new distribution channels such as Paytm and Zerodha (who are largely into direct plans) on the mutual fund distributors?
I think online distributors will complement existing distributors. There are 60 odd platforms offering such services. In my view, they will create awareness about mutual funds. Today, we have around 2 crore unique investors. With entry of these players, we will have 20 crore customers in the future.
These 20 crore investors need quality advice and handholding to invest their money in mutual funds. Advisors having better systems and processes in place, such as online execution facility will be in a better position to service this large customer base. However, advisors who are not willing to adapt to these technological changes may struggle with customer retention in future.
SEBI has asked AMFI to comply with the best practices circular. What will AMFI do to ensure the adherence to the circular in letter and spirit among members?
AMFI is discussing this matter internally among members. However, we should first understand why SEBI has initiated this dialogue. SEBI thinks that aggressive commission payouts to distributors can lead to sale of schemes that may not be suitable for specific investors. A uniform commission structure will ensure level playing field among fund houses.
While some fund houses have reduced trail commission to the extent of 15 to 20 bps with rationalization of TER, a few decided to cushion the impact of such a reduction. What is AMFI doing to bring uniformity in the industry?
This is a commercial decision. Ideally, everybody has to cut TER to some extent. Whether a fund house wants to absorb such a cost or reduce the trail commission is at the fund house’s discretion.
