How has been the response to your second Trigger Fund?
We raised Rs. 35 crore in the first Trigger Fund. Due to its success, we managed to raise Rs. 125 crore in our second fund despite our limited distribution network. We had wound up the first Trigger Fund in less than nine months after the fund delivered 30% absolute return. Both distributors and investors were happy.
By when do you propose to wind up this fund?
The market has fallen 5% since we launched our second Trigger Fund and our fund has fallen by about 2%. We can’t forecast the timing of the fund’s closure. We will wind up once it delivers 30% return and we are aiming to achieve this target in 18 months.
Since you aim to deliver 30% in 18 months are you taking any aggressive bets?
We took some time to invest money because the markets were volatile. We had raised money in March but we didn’t deploy it immediately which is the reason the fund has not fallen as much as the market has. We have invested in growth stocks which were available at a reasonable price. We avoided stocks which were trading at high PE.
How has been the progress of your fund house so far?
We have now broad based our distribution network, especially by empanelling more IFAs. Earlier, we relied solely on our banking network but now we have some acceptance among distributors.
We are focusing more on SIPs now. We have added good number of SIPs in the first quarter of this year. We are not competing with the larger fund houses. We are trying to attract new investors and grow in markets where other AMCs are not growing. More than 60% of our investors are first time MF investors.
Are these first time MF investors from T15 or B15?
They have come largely from B15 but we are also adding first time MF investors in T15. We are getting a good response in eastern UP. We are getting good inflows from Varanasi and Gorakhpur.
How do you think the industry should attract more IFAs?
We need more IFAs to reach out to new investors and new cities. Many retail clients and HNIs would have faith in IFAs. As manufacturers, it our responsibility to train and bring more IFAs in the industry. We have to make the business more viable for distributors.
What has been the feedback on the new commission structure from distributors? Has the dust settled yet?
By and large distributors have accepted it. We have received some feedback from distributors to make changes to the new commission structure. We have passed the feedback to AMFI.
The industry has received Rs. 70,000 crore net inflows in equity mutual funds last fiscal. This fiscal, equity MFs have already received Rs. 20,000 crore. Do you think this momentum will continue?
Investors have become savvier now. Unlike before when they redeemed when the markets corrected and invested at the peak, investors are now investing at dips. Now, we don’t see huge redemptions when the markets correct. The money will continue to come to equity funds as the industry has a strong 70 lakh SIP book now. SIPs will help sustain the industry during lean phases, especially when there are no NFOs.
Going forward, which distribution channel do you see growing at a faster pace – IFA, ND/Bank or online platforms?
I think all the channels can grow and should grow in different ways. Different distribution segments have different client base which do not overlap. Banks cater to high net worth segment, IFAs cater to retail and online platforms cater to tech savvy people. In percentage terms, online channels will grow faster. All the segments can grow massively. There is enough room for 100 AMCs and 2 lakh distributors to make money in a market like India.
But we are seeing the opposite. Some AMCs are folding up...
AMCs have exited in the past also. If you come with a certain business model and expectations, sometime it may not work. Around the world and even in India you can see that AMCs which are domestic players or have a local partner have grown big. There are some exceptions though. But I’m sure that our market needs more AMCs.
Do you think AMCs are equipped to deal with fund manager exits by institutionalizing fund management process?
We generally try to avoid promoting any single fund manager. We have institutionalized our investment management processes.
Ultimately, the fund manager has to take the call, unless you are running an ETF. The human element cannot be eliminated because the fund manager generates alpha. The processes and rules ensure that a fund manager cannot deviate too much. However, we do give some leeway to our fund managers within some boundaries.
If you follow the process, it may happen that your fund may not be on the top performing charts. But it also ensures that you are not in the bottom.
