Edelweiss Mutual Fund has now got down to hard selling its flagship product, Edelweiss Absolute Return Fund, long after it was launched
Vikaas M Sachdeva, CEO, Edelweiss MF, tells Cafemutual in an interview that the key to success for Edelweiss will be a differentiated products strategy. Excerpts from the interview:
What are Edelweiss MF’s plans?
What we are doing is we are focusing on two sets of products: the conventional range of products and a range of innovative products. The innovative products are basically in the realm of volatility control. The two asset classes - equity and debt are completely uncorrelated. Anybody who gets into debt has very little chance of getting impressive returns and anybody who gets into equity creates wealth but the volatility which comes with it causes palpitations.
How does Edelweiss MF address volatility?
We have a fund called Absolute Return Fund. It basically has a different investment strategy. It has two buckets. Bucket A is at least 50 per cent in equity which is actively hedged. The other 50 per cent is based on a dynamic strategy which allows you to invest in IPOs, special situations, buy backs, corporate actions, arbitrage, and if nothing else, fixed income. At any given point of time equity exposure is around 75-80 per cent. That’s why it qualifies as an equity fund. But the net exposure is usually much less because it is actively hedged. This fund has done extremely well in the last fourteen months. In fact, this month when NIFTY is down by 11 per cent, this product is down by only 2 per cent.
Are investors in large numbers attracted towards the fund?
The low volatility fund is probably at the same stage as income funds in 1995-96, when I was getting into the mutual fund industry. Or for that matter, where MIPs were in 2000-2001. We believe this is a very strong segment to be in and we believe that it is actually a different asset class. You benchmark it against MIPs because the net exposure to equities is only 20-25 per cent. But it is tax free returns for you. Long term capital gains tax is zero and dividends are tax free. Volatility is much lower.
Who are your target investors?
We are talking to a very select set of distributors. We are focusing on a set of investors who are MNIs (medium net worth individuals) and above. MNIs are investors who have investible surplus of Rs 5 lakh and above. We believe retail investors will start investing in Absolute Return scheme a year down the line. Simultaneously, we have a range of conventional products. We now want to slowly and gradually start building the base. We have already laid the foundation.
MF sales are concentrated in top 7-8 cities. How will you cut through the competition?
Our strategy is to go with differential products. My segment is more informed. I am talking about the MNI numbers. And the more informed person will usually go for a product like this. MNIs are concentrated in the top 7-8 cities. We want to offer them this product. We are actually expanding the market. We are not going and talking to the same people the same way. Each of our actions is looking at market expansion. And that’s how we will grow.
What is your distribution strategy?
Our distribution strategy is primarily through distributors, wealth outfits, IFAs and those who can understand this product. It is a question of basically getting the point across. So the contact points will be very concentrated. I won’t have a 10,000 distributor strategy. May be, I will have a 500 distributor strategy across the country. The opinion makers are the ones that we are concentrating on. We are also talking to CFPs and chartered accountants.
What kind of AUM are you targeting for this product and also for the AMC?
I think the whole race of AUM has led to several issues in the past. Our focus is more on the number of investors though not retail investors at the bottom end. We have in the group a very strong wealth group and a very strong broking team. So, internal distribution is also our focus. Money will come. It will be a question of time. But you don’t want to short change the entire process.
In terms of products, will your focus be on innovative ones only?
You cannot survive on exotic food alone. You have to have regular stuff as well. We will have a well balanced diet for the distribution industry. We will have a balanced portfolio. Mid-cap fund scheme documents have been filed with SEBI. We have filed for FMPs also.
Your focus appears to be more concentrated on wealth managers?
Unlike in FMCG where people look at peers, in investments, people look at those who are more successful. Opinion makers understand innovative products better. We are targeting those people. This is a product that requires some explanation. Although, we try to de-jargonise it so that everybody understands, but still it takes time. Why try to get across to people who will find it difficult to understand this product and try to get 10,000 applications. I would rather focus on 100 people. You can take it forward to 10,000 later on.
