Managing Director and Chief Executive Officer of SBI Mutual Fund, Dinesh Khara talks about his plans to steer the fund house to the next level.
What priorities have you set for your
fund house?
Our overriding priority is to be among top three fund houses in the country. To achieve this target, we have increased our engagement with distributor community as well as investors through our investor awareness program across the country.
In online space, we have already increased our presence. Currently, we offer a mobile transaction facility through which an investor can directly invest or redeem in the schemes of SBI MF at a single click.
We strive to deliver quality services and customer satisfaction to our investors through a range of simple products so that investors can easily understand it. We keep ourselves away from complicated products which investors find difficult to understand.
You opened 51 branches in B-15 towns. How has been the progress?
We opened these branches on January 27, 2014. So, over two months have passed and response has been fairly good. So far, we have received over 7000 SIPs and mobilized close to Rs. 200 crore from these branches. These investments are purely from retail clients. Any new branch office takes time to stabilize but these branches are shaping up well.
We are promoting SIP in a big way to inculcate discipline of savings among investors at these locations. Secondly, we are empanelling new distributors to enhance our business in these locations. We reach out to prospective distributors like college students, professionals, etc. who want to build a career in financial services through ground level awareness programs. Also, we are trying to empanel new cadre of distributors in these areas.
How are you going about doing investor education programs? What kind of feedback do you get from people?
We use both mass media and ground level activities to evangelize the cause of mutual funds through our 360 degree campaign called ‘Fund Guru’. We hold investor awareness programs across the country. We have adopted 10 districts under District Adoption Program but voluntarily we are working on 20 districts to create awareness about mutual funds.
We are targeting a niche audience through these programs. To gather a crowd of 100 odd people is an easy task but accumulating a few meaningful people is very difficult. It should be an audience and not a crowd. Hence, we focus on inviting professionals like teachers, students, doctors and lawyers who are thought leaders and can be our prospective clients.
Also, response from these people is phenomenal. It is evident from the queries in such programs. Simply put, it is a reflection of level of interest generated among people.
What are the challenges in creating awareness about mutual funds among people?
We observed that many people have misconceptions like mutual fund invests only in equities, they need lot of money to invest in MF etc.; however, we aim to dispel these myths through our investor awareness program. Another trend we have noticed is that retail investors invest when the market is at its peak and exit at low levels. They suffer at both ends. Through our programs, we encourage them to take SIP route and avoid timing the market.
Secondly, investors who burnt their fingers six years ago may not like to come again. Still, the industry is facing a challenge to regain their confidence in mutual funds.
The regulator has said that fund houses should reach out to younger generation by facilitating online investments. How do you plan to reach out to internet savvy investors? What are the challenges?
We have already increased our online presence. In fact, we have launched a mobile application called ‘m-easy’ through which investors invest and redeem their investments in SBI MF. However, it is yet to take off in a big way.
We strongly believe that industry needs to focus on young professionals. These young generation investors have a potential to park their investible corpus for 15-20 years. However, this segment of investors is still untapped due to lack of awareness.
To bring young professionals on board, we hold investor awareness campaigns in companies.
SEBI has asked fund houses to distribute funds by partnering with public sector banks. We understand that currently only a few PSUs are actively selling mutual funds. What is it required for PSU banks to take up mutual fund distribution more actively?
With widespread branch network, PSU banks have a strong reach across the country. However, a lot of work needs to be done when it comes to marketing mutual fund products through this channel.
Generally, PSU banks are engaged in sale of fixed deposits which generally come with fixed interest. Also, a customer who walks in banks for investment product prefers assured returns. Mutual funds are completely different products. It has no fixed return and offers non-linear returns.
Marketing mutual funds requires different skills and expertise. To sell mutual funds, these PSU banks need to understand the products very well so that they can better explain it to investors. Also, they need to understand the risk appetite of investors before advising any product.
The industry's focus suddenly seems to have shifted to promoting debt funds in a big way. So far HNI and corporates have been investing in debt funds. How are retail investors looking at debt funds? What proportion of your debt assets is retail?
In the past, we have seen only HNIs and institutional investors getting into debt funds through liquid fund and dynamic bond fund. Surprisingly, over the last year, the industry has seen a lot of retail money coming in debt funds especially in ultra-short term fund and FMPs due to attractive bond yields.
The added benefit of double taxation with an attractive coupon rate of 9-9.5% has helped FMPs to find favour among investors. Also, many IFAs promote liquid funds to retail investors as against savings account due to accrual benefits.
Last quarter, we have received 70% of investments in FMPs from direct channel. Of this, I can say that around 30% of money came from retail investors. We will continue to promote debt funds among retail investors.
Overall, we have 35% of investments in our debt funds is retail.
SEBI has asked fund houses to have skin in the game by putting seed capital in schemes. What are your views on this?
SEBI wants to ensure that fund houses are more committed towards fund performance. Such practice is already prevalent in some countries. In US, the fund managers have to put skin in the game. In India, fund houses have been asked to invest 1% of total money raised in NFO. We believe the move will benefit both AMCs and investors and also result in better scheme performance.
