Aashish Somaiyaa, CEO, Motilal Oswal AMC believes that the acceptance of ETFs will increase as the distribution model evolves.
As
the newly appointed CEO of MOSL, what are your key priorities?
Motilal Oswal has been in the equity business for the last 26 years. My overriding priority is to carve out a niche in the equity segment. The focus will be to build a reputation in the mutual fund industry as an expert equity house.
As one of the most recent entrants, how do you create your space in a market which is dominated by the top 10 players?
We are into equity business since 1987. And we have a very good reputation for our equity research.We are the only research house which provides wealth creation studies. So, I will not term MOSL as a new entrant. Managing open ended mutual fund at the end of the day involves equity expertise. A lot of FIIs, hedge funds, sovereign wealth funds prefer investing in India through Motilal Oswal.
Nowadays, virtually all industry players have a broad lineup of products covering the entire spectrum. However, we have only one aim i.e. to carve out a niche in ETF and active funds space. Our core approach is being focused and disciplined.
Motilal Oswal started with passive funds and has recently filed offer documents to launch active funds. What was the reason to shift from passive to active funds?
Having passive fund doesn’t preclude you to launch active funds. Investors need both active and passive funds. At the end of the day, both funds need equity expertise.
Active management is our forte. We have already launched an active fund in April i.e. MOSt Focused 25 Fund – a large cap fund. Hopefully in FY13-14 we will launch our second and last equity fund that will look at the mid cap space. We aim to focus on these two funds only.
How do you plan to strengthen your team in fund management and sales?
We have a big team in fund management. In fact, we are probably the only fund house which has a 1:1 ratio in investment and sales. Our ETF, PMS and mutual fund teams are segregated. Right now we are looking to expand the sales team.
Tell us something about your new initiative with Next Advisors.
We have created a PMS portfolio with Next Advisors. Based on the feedback of their advisers, we have created a multi-asset PMS. It keeps allocating money between value PMS and short term debt, based on market conditions. If the value index is high, exposure to equity will be reduced and money will be moved to short term debt. However, if the market valuation is low then it will move from short term debt to equity.
Also, we have created asset allocation PMS in which money can be distributed among various asset classes such as stocks, ETF, Indian large cap, Indian mid cap funds etc.
Distributors have not been too enthusiastic about ETFs. How can the industry overcome this challenge?
I think once people start registering as investment advisers and move to a fee based model, it will be a big tailwind for ETFs. Secondly, operating platform for mutual funds and stock markets are different. The Finance Ministry has recently announced that mutual fund distributors will be allowed membership on stock exchanges. Once mutual fund distributors start operating on stock exchange platforms, their awareness about ETFs will also increase.
Many distributors have misconception that they won’t get trail commission on ETFs. However, the fact is we do pay trail commissions on ETFs though the payments are not as high as actively managed mutual funds.
How many distributors are working with MOSL? How do you plan to enhance your reach?
We are a B2B firm and are more focused on tying up with platforms and banks such as iFast, NJ India, Deutsche Bank, Barclays and so on. We actively participate in IFA conferences. Also, we have an experienced team that knows the distribution network well.
Both the government and the central bank are trying to curb gold imports. Reliance has suspended fresh investments in gold ETFs. Have you started going slow in promoting Gold ETF?
As an individual, I feel we are nobody to decide whether to promote any one category or not. It’s ethically wrong to push a product first and later pull it back due to bearish condition. A client’s portfolio should consist of different products and advisers should decide which categories should find a place in their client’s portfolios.
A major challenge for new entrants is to reach Rs 10,000 crore mark AUM. What is your strategy to reach this milestone?
I feel the entire perception of reaching Rs 10,000 crore AUM is wrong. AMCs which started 20 years back would have reached Rs 20,000-25,000 crore mark by now. We, at MOSL, are not taking any such pressure.We know our strengths and our aim is to build expertise in the equity segment. I believe if we do the right things we would automatically achieve even better figures. In this business, it is important to position yourself as an expert rather than compete with others.
What is your plan to expand beyond 15 cities?
We already have a very strong presence in B-15 cities. Our largest client base and biggest franchisees are located in B-15 cities. We have around 12% of AUM coming from this segment. In fact, we have received a good response from states such as Jharkhand, UP, Bihar, West Bengal etc. in our first equity fund.
