What are your plans for 2019 to grow business?
As you would be aware, Essel Mutual Fund was one of the fastest growing mutual funds in the country in 2018. This was primarily because of the initiatives taken by us on the sales front, which include industry leading engagement and services to our distribution partners as well as expanding our footprint to more than 40 locations. Another important aspect is our portfolio focus on quality. As a result, despite negative credit events in the debt market over the last few years, our investors have never suffered a loss because of these. This was possible due to our unfailing and singular focus on ensuring that we follow best practices when making investment decisions, which assists the stellar performance exhibited by some of our schemes.
These factors have provided us with a strong foundation to continue growing our business in 2019. On the sales front, as in 2018, we will launch new funds positioned in our existing product gaps at the appropriate time. On the investments front, we will continue investing in a manner reflective of the high standards we have set for ourselves. We are confident that we will continue to garner support from the distribution community for our efforts and continue growing at an extremely fast pace.
After witnessing growth in assets in the past, last quarter wasn’t good for Essel MF as there has been an erosion of Rs.500 crore in quarterly AUM. What are the key reasons for this?
Towards the end of the last quarter, the institutional MF marketplace was shaken up by the events surrounding IL&FS. These events and the consequent losses suffered by investors in debt schemes, led to a temporary loss of faith in the MF industry among these investors and they chose to exit the industry till greater clarity emerged. Despite having no exposure to IL & FS, we were also hurt by this phenomenon on the institutional side of our business, losing assets in our liquid and debt schemes.
On the other hand, our retail assets have continued to grow through these months and we haven't experienced even a week of negative sales during this time. As mentioned earlier, we have been widening our footprint and moving closer to our distributor partners. This growing reach has also been rewarded with support from IFAs and national distributors alike.
Dr Subhash Chandra’s open letter indicates that the Essel promoters are under tremendous pressure to repay their debt obligation. How would this impact the AMC business?
Firstly, Dr. Chandra is to be congratulated for the trademark honesty with which he has responded to these challenges. As the letter makes amply clear, there are no challenges in any of the operating businesses. The challenges are limited to promoter level borrowings against their shareholding in the operating companies and are at a well advanced stage of resolution. In the meantime, certain events made a communication imperative, which has been done.
As mentioned earlier, at Essel Mutual Fund, we follow industry leading best practices on the investments side. As a policy, we do not have any exposure to any Essel Group entity either directly or indirectly despite the group owning some of the best run companies in the country. At the same time, we are confident that this situation will be reversed in an extremely short time frame and the group will emerge from it stronger. As such, we do not see the current situation having a lasting impact on our business.
Distributors may shy away from Essel AMC, what would be your message to them?
We believe that there is no reason for distributors to shy away from our offerings. We are a professionally managed AMC regulated within the same set of regulations as the rest of the industry. We have products capable of reaching at the top of their respective leagues. We have a network and reach which is far wider than that of any other AMC our size. We have established industry leading sales processes, which empower our distribution partners to gain from associating with us. And we have the full commitment and support of a business house which has overcome many earlier adversities to emerge as one of the leading business houses of the country. We would urge our distributor partners to keep their eyes firmly focused on the long term partnership prospects we offer and continue to support our growth.
How would rationalization in TER would impact – AMCs, distributors and investors?
Rationalization of TER, as announced, will strengthen the smaller AMCs by some margin. This is because of a variety of factors not least of which is our ability to reward our partners for their efforts in offering our products.
While this does mean that our expense ratios are higher than our bigger counterparts, smaller funds enjoy many advantages which help them overcome this gap and may generate superior performance for their investors. The agility and ease of investing relatively smaller amounts is an important differentiator, which also tilts the scales in favour of smaller funds.
As such, we expect investors, distributors and smaller fund houses to benefit from this change.
