As
a foreign player what are the unique challenges that you face and how do you
plan to overcome them?
As a foreign player, the most important thing is to create brand recognition with the retail segment. We are a very strong institutional brand and enjoy a strong market share. We are doing our bit to create brand awareness through our Market Insights Program which helps investors and advisors to understand the markets in a better manner.
There are no challenges in terms of business per say. Most of the challenges are similar to what the industry today faces. In six years we have created a niche for ourselves. The environment is challenging but we have enough products and performance to face those challenges.
How do you evaluate the progress of your AMC since its inception in 2006?
It’s been good. We started with a big bang. Back in 2006, we had one of the biggest launches for our equity fund. Equity markets have been on a sideways movement since then. We saw a turmoil in 2008 and then recovered. We saw a proper bull run for 12 months and since then GDP and corporate earnings have been challenging. We will make a comeback as the first signs of recovery in equity markets are showing up. Fixed income has been our forte. We have grown our assets very rapidly on the fixed income side. International equity is also our big strength – both in terms of AUM and share in the incremental gross flows. Our clients have had a positive experience with our international funds.
How are you going about creating investor awareness which is mandated by SEBI?
We are conducting Market Insights program. It is considered one of the highly appreciated and sought after programs in Asia and has received good feedback since its launch in India a year back.
There is a belief that US equity funds may not be able to sustain their strong performance as the Indian economy is likely to do well and the recovering rupee could make things a little tougher for such funds. Do you subscribe to this view?
US equities have nothing to do with rupee. Rupee is a byproduct of international investing and the performance, to an extent, ultimately depends on currency fluctuations. But when you look at one to five year period, the underlying currency is not such an important factor. The S&P is an all-time high but when you compare that with the previous two peaks then it looks more attractive now both in terms of valuation and dividend yield. The dividend yield and the yield on ten year US treasury stock is at the lowest when compared with the previous two peaks. This is a barometer of the relative attractiveness of equities versus fixed income.
US equities are giving a higher yield. Corporate balance sheets are looking extremely good. US consumption which accounts for nearly 65% plus of the US GDP is high. The household net worth is at an all-time high. A major portion of US household wealth is in housing market and equity markets. Both are recovering. Their debt service coverage ratio is at an all-time low. These factors make US markets attractive. There is a renaissance happening in the manufacturing sector in US. The progress which the US economy is making on the shale gas recovery and natural gas prices is good. The prices in US are five times lower as compared other parts of the world. The corporate sector is doing well and within that the manufacturing sector is doing extremely well. We don’t talk about currency when we sell international funds.
Are you looking to launch more international funds?
We are looking to launch a Europe focused fund in January. This fund would focus on investing in developed Europe. The developed Europe has better linkage with other economies like US, China and Japan. There are signs of recovery in Europe. We would be open to looking at launching a Japan fund if the opportunity comes.
How much does JP Morgan manage globally?
As of September 30, 2013, JP Morgan Asset Management has $1.5 trillion of assets under management globally.
You have been a CIO in the past. Do you also oversee fund management in your current role?
I’m still a fund manager at heart. I create some nuisance value for fund managers and its fun. Fund management is something I have grown up with. It is very close to my heart. I use my fund management skills on the business side currently. I try to spot the trends earlier than the market. I try not to dabble directly in fund management. We have extremely capable fund managers. Of course it’s stimulating to discuss your thoughts with the fund managers. It gives me my talking points when I go out in the market to bring business. Being a fixed income manager I had to go and talk to clients and other stakeholders. Sales is a part and parcel of a fund manager’s job. It’s just that I’m doing it full time now.
Is it hard to transition from a fund manager to a CEO?
Managerial skills are inherent. I’m a big fan of talent. I like to promote talent. So if you have the combination of right products and the right talent to promote those products then end results are only a matter of time. I apply simple methods to grow business. It’s not rocket science.
Which category of funds are likely to do will do well in 2014?
We are positive on the global growth. We favour equity as an asset class. Growth is making a comeback in economies which are recoupled with the developed world. Earlier, it was decoupling. If you are linked to those economies then you may tend to benefit. We are looking at valuations from a historical perspective, future earnings potential and currency movements. If it is a current account surplus economy and if there’s not much pressure on the currency we definitely like those markets relative to other markets.
Which category within the fixed income side will do well next year?
Short term bond funds are all season products. Investors will continue to invest in liquid and treasury funds. Investors have gone through some pain in the last five months. The superlative returns which investors were making in duration funds has been disturbed. If you extend your holding in duration products for the next six months you should ideally get a reasonably good opportunity to exit by making reasonable returns.
How do you plan to increase your equity assets?We are investing in talent. We are investing in investor education. We have a highly successful Market Insights program to understand global market. It is a fantastic tool for investors and advisors to understand global markets. India is today directly correlated with other markets. We explain the events which affect Indian markets to investors and advisors. It is important to have the right kind of products so we are continuously launching products. The inflows depend on performance of products. If your performance is good and products are true to label then assets under management will increase.
A large part of your inflows come from NDs and banks. How are you trying to broad base your distribution network?
Most of the distributors are registered with us. It is a question of reaching out to them on a continuous basis through right products. It’s an ongoing process.
