How has been the progress of L&T MF in the last two years?
We have done reasonably well as compared to our peers. We have added a lot of folios due to good fund performance; our two unique funds (L&T Emerging Businesses Fund& L&T Business Cycles Fund) that we launched last year found good acceptance among investors. We are now the 10th largest AMC in terms of equity AUM (excluding arbitrage fund). Our AUM has grown from Rs. 11,500 crore in November 2012 to Rs. 22,500 crore now. We have achieved this growth post the acquisition of Fidelity.
How are you engaging with distributors?
We are focused on providing value add. Around six months back when there were some challenges facing the economy, we conducted a seminar where eminent personalities from domestic brokerages and foreign brokerages came to share their views on our economy.
We do a lot of training programs for our distributors. For instance, we organized a seminar on how to use Microsoft Excel to improve business. We do not use Excel fully but it can do a lot. We trained distributors on how to use various Excel tools and formulae to cull data which can be of great help to their business. This was very well received by distributors. A lot of distributors requested us to do this seminar for their staff too.
We have now launched a program on social and digital media to help distributors enhance their business.
How are you trying to grow your B15 presence?
Out of the 56 branches, we have 40 branches in B15 cities. We are planning to open around five branches in B15 cities this year. We launched two unique funds last year in which around 60% folios came from B15 cities.
How do you plan to reach the top?
Any player who has a long term focus and is bullish about the growth of MF industry will aspire to be among the top. We will reach there in a calibrated manner.
Our focus is on B15 and increasing our SIP book. We have launched an initiative called ‘Multi SIP’ which allows investors to start SIPs in three schemes by filling out one form, one mandate and with a single cheque. This facility helps distributors cut down on paperwork and also they are able to get higher wallet share of investors.
Apart from this, we will leverage digital and social media to grow. We have launched an application on Facebook called ‘Go Invest’ which allows investors to access their account statement and scheme portfolio on Facebook itself. So we will use a combination of methods to reach the top.
Are investor awareness programs yielding the desired results?
Any new initiative takes some time to gain traction. You have to promote it. But people are curious about IAPs.
Do you think AMCs are equipped to deal with fund manager exits by institutionalizing fund management process?
Institutionalizing fund management process is very critical. In the past too, fund managers have moved and AMCs have been bought over. But that has had little impact on fund performance. Investors are looking for the philosophy of the fund house.
Let me cite the example of L&T Equity Fund in this context. The fund has completed 10 years. It has been through the bull phase of 2005-08, the financial crisis, fund manager change and sale of AMC (Fidelity to L&T). After all this, Rs. 1 lakh invested in NFO would be Rs. 6.25 lakh now, which is a CAGR of 20% when the benchmark index has given a CAGR of 15%. This fund proves that our AMC is equipped to deal with any situation. The process is always important.
I’m not saying that fund managers have no role to play. There is always a fan following. After Sachin Tendulkar retired, did our team started losing matches? We didn’t. If MS Dhoni retires, new heroes will emerge. People would still love the Indian cricket team.
Investors just don’t exit just because of sale of AMC or change in fund management.
Do you think our industry is ready for a pure fee based advisory practice?
A lot of distributors have started charging fee. It depends on the distributor’s ability and mindset. We will move to advisory practice if distributors are confident about themselves.
Going forward, which distribution channel do you see growing at a faster pace – IFA, ND/Bank or online platforms?
It is difficult to predict which segment will grow faster. I think technology will play a bigger role in helping distributors expand. So any channel which adopts technology will grow faster.
What has been the feedback on the new commission structure from distributors? Has the dust settled yet?
The proof of the pudding is data. Mutual fund sales have not come down, which is evident by the inflows in mutual funds. I’m not disputing that there are discussions around the cap on upfront commission. But it has not affected the sales so much as mutual funds is a product which cannot be neglected by investors.
Will the commission structure be reviewed? It could be reviewed but we are not sure what will happen after six months. Distributors who are focused on their business are making money.
The industry has seen net inflows of Rs. 70,000 crore in equity funds last fiscal? Do you think the momentum will continue?
The inflows are coming due to superior fund performance, thanks to the improved market conditions. Also, number of SIPs has gone up. Thus, we expect the momentum to continue. However, it would be unrealistic to expect the kind of returns you saw last year. On a long term average, mutual funds have delivered 15% CAGR return. It is far higher than any other asset class. Thus, we expect the gross inflows in equity funds will continue to be good in future.
Some distributors allege that AMCs are trying to bypass them by promoting direct plans. Your comments...
The share of direct AUM to total industry AUM is very low in India as well as in foreign countries. There will be some customers who will go direct and there will be investors who would need advice. Distributor not only helps you to invest but he/she also services investors. I don’t think AMCs are equipped to handle a large number of direct investors.
Distributors should not worry about direct plans. MF industry currently has 1.5 crore investors and if we are able to double this investor base you are still left with a substantial number running in excess of 1 crore new investors! So the market is large for distributors.
What is your roadmap for L&T MF for the next two years?
We want to keep growing and innovating. We want to enhance the customer and distributor experience by improving our internal processes and systems.
