What is your roadmap for the fund house for the next three years?
We at UTI Mutual Fund believe that the next decade will be a defining period for India in terms of economic growth. With a strong progressive government in place, the economy will grow faster and benefit all strata of the population.
With this in mind, we have set for ourselves a goal of achieving sustained growth for not only for our mutual fund business but also for our international and alternate asset business. For this, we are in the process of opening new branches, increasing our distribution reach through IFAs and strengthening our digital presence.
UTI MF is among the leaders in terms of retail AUM as on October 2018. What has worked for the fund house to become leader in retail space?
UTI has always been a contributor in the retail space of the industry. I attribute this to the following aspects
- Trust of the retail investor in brand UTI has always been strong.
- Our style of fund management being conservative with focus towards providing the best risk adjusted returns
- Having a full range of product suite from equity, hybrid, debt and special category of funds like UTI ULIP, children plan and retirement fund
- The support of the IFA community in distributing our products
- The efforts of our team in reaching out to our partners and investors
What are the three things that you have learned about retail investors?
My key learnings about retail investors are
- Retail investors invest with a long-term time perspective.
- They are more immune to volatility in the market and deserve credit for this
- They like the personal touch that IFAs give them for their investment process
Margins of AMCs have reduced post TER cut. How would you ensure that the profitability of the fund house remains intact?
The best way to increase profitability is to increase our business and grow rapidly. However, like all AMCs, we will have to reduce our expenses wherever possible without impacting business. There are a number of areas, where we can optimise, to reduce the costs.
In your opinion, how can distributors grow their business in an all trail era?
We believe that in a long term, an all trail model is good for the distributor as it generates a revenue stream for the distributor. However, there is a genuine concern of the new distributors, who are setting up their business, on bridging the gap between income received and the cost that they have to bear upfront like travel cost, administrative expenses etc. As an industry, we will have to design a way of attracting new distributors to the business.
While many AMCs have either opted to pass on the entire TER cut to distributors, others have absorbed some portion of the cut. What will be the approach of your fund house on this front?
As a fund house, we cannot be out of line with the industry. However, we will ensure that investors, distributors and the fund house interests are protected in the best possible manner.
Since commission structure and incentives of distributors are more or less similar across fund houses, how will you ensure that you continue to get good business from your top distributors?
We feel that for the distribution community, the emphasis has always been on the brand, fund performance and quality of service, than on commission alone. These parameters will not change as distributors keep their investors interest paramount. We at UTI are working hard on rebuilding our strong connect with the top IFAs. According to me, the warmth of the relationship will be the key parameter for success with the top IFAs
How are you going about expanding distribution reach of your AIF business?
AIF is a completely different business. UTI has a specialised subsidiary - UTI Capital, which works in the AIF space. We advice investment in AIF to the sophisticated investors who understand the risks of the investment. Therefore the distribution of the product needs to be done selectively.
How can advisors build investor confidence in debt funds in the aftermath of the recent events? UTI has exposure to all the three companies – Zee, DHFL and IL&FS. What is your message to advisors?
Firstly, in Zee Group on the debt side, we have exposure only to Zee Learn at an operating company level and not towards any holding company of the promoter group (loan against shares), where there were some negative news reports. When we invested in DHFL and Jorabat Shillong Expressway Ltd. (JSEL) SPV of IL&FS, both these papers were AAA rated while Zee Learn was AA+, and were high quality papers backed by proper securitisation. JSEL is a revenue generating SPV and its issue stems from the problems at IL&FS group which has gone to NCLAT. In order to protect the existing investors and to prevent any speculative investment, we have imposed an exit load only for new Investors on the schemes, which have a significant exposure to DHFL.
