Arvind Sethi, Managing Director and CEO, Tata Asset Management talks to Cafemutual about his plans to put the fund house back on the growth track and more.
What key priorities have you set for Tata MF?
There’s no doubt that we are a little behind. We have to find a way to move forward. We wish to align the interests of investors, the intermediary and ourselves. Our top priority to strengthen our fund performance and gain market share.
The
industry has lost close to 30 lakh folios from equity funds in the April to
November period. What has been the experience at your fund house?
We are also seeing redemptions. In 2012, the redemptions were more than at the rate at which market was losing money. But this year the pace of redemption has come down.
Over the last three to four years, Tata MF AUM has declined from Rs 25000 to around Rs 19723 now. How are you planning to grow your asset under management?
We want to be much more aligned to the investor and we want to be much more relevant for the intermediary. It is a B2B business model because we are dependent on distributors to bring investors. I’m visiting lots of smaller cities like Trichy, Salem and Madurai. Our fund managers are also meeting distributors. We are trying to reconnect with distributors. Our brand ‘Tata’ is known to investors so it is easier for distributors to position our funds among investors. We just need to provide the right products to our distributors.
Many AMCs are investing in training and development of their distributors. How is Tata MF engaging with its distribution partners?
We are also doing
training but we need to be more evolved at that. We are trying to find different things which are of interest to them.
Different distributors have different needs.
So we are trying to do something which is relevant for them rather than
doing a standard program.
Are you planning to launch any new funds this year?
We will keep launching
capital protection funds and FMPs. But we are not looking to launch any new
equity funds. We will launch an overseas fund. Overseas funds don’t tend to
beat benchmarks. Thus, it will be a global equity index fund. It will be a unique offering
in this market. The existing funds in the
industry only give investors a specific exposure to a country like China or
America. Our fund will be a truly global fund.
Many AMCs are launching close end equity funds. Are you also looking at this space?
We don’t believe in close end concept. If you have decent open end funds then there is no need to launch new funds.
What is your strategy to turn around the investment performance of Tata
MF?
You just have to give time. We are in the top quartile in debt
funds. The challenge is remain in top quartile. In equity funds we are now much
more disciplined about watching the benchmark and trying to give performance
which is better than the benchmark. We’ll lock some gains when the fund is
outperforming the benchmark so that we may have cash when the markets are
low.
Has any foreign AMC approached for a tie up with Tata MF? Are you open to bring
in a foreign partner?
We are open to that possibility but we are not actively scouting for a foreign partner. There is quite a lot of money in India which is being managed by funds in the overseas markets. Indian investors are also looking for overseas exposure. But at this juncture not many foreign AMCs are interested in coming to India since the economics of the business is not that compelling. They say India is good but they don’t find the mutual fund industry profitable.
Do you think the net worth of AMCs should be hiked?
Our fund house can invest more capital if the need be. However, the investment management industry is actually meant to be a low capital business. Just having more capital does not mean you are a serious player. Capital should not be a barrier as long as AMCs meet all the regulatory requirements.
Some AMCs have moved from paying upfront commission to only trail model. Would you also be considering adopting this model?
We would prefer to be 100% in that model. But some distributors prefer getting upfront commissions. The trail in the first year should be similar to the trail in the second year. If the first year trail is 1% and second year trail is 0.75% then you are tempting distributors to churn.
Tell us about your investor awareness initiatives. How has been the response to
your quiz competitions?
The response has been
encouraging and we had good viewership for your quiz competitions aired on television
channels. A lot of people are scoring high marks in the online quiz. Thousands
of students participated in our quiz programs. The surprising thing was that
the winner was a medical student. We are trying to get a lot of people from
non-finance background to participate in this. We’ll hold these programs in
different cities every year.
How are you trying to increase your B-15 market share?
We are currently present in 74 locations. We are investing in investor awareness initiative under AMFI’s district adoption program (DAP) in Jamnagar and Jamshedpur. We want to do something which will make a difference in the lives of the people in these districts.
