Axis MF is now the 11th largest AMC. For a fund house that has yet to complete 6 years, that is a significant achievement. To what do you attribute this achievement?
We will complete six years in October 2015. There are a couple of reasons behind our phenomenal growth. Firstly, we have differentiated ourselves from many of our peers. We set up an institutionalized investment management capability, an area where we found a gap in the industry. This differentiation is not merely for the sake of differentiation. This adds significant value as we have been able to offer superior risk adjusted performance to our investors. Our institutionalized framework allows our experienced fund managers to perform even better. This has helped our funds to perform well even during bad times. Our funds have outperformed benchmarks at a lower risk.
The second factor which contributed to our growth is product innovation. We launched multi asset funds like Axis Triple Advantage Fund, Axis Income Saver Fund and other hybrid funds which received good response from investors.
All this has helped us acquire a large number of retail investors. Around 50% of our assets are retail and as we speak, we have become the 10th largest player in terms of equity AUM.
Isn’t the fund manager (and not the institutionalized mechanism) who has a greater role to play to drive performance?
The idea is not to curtail the freedom of our fund managers. Following a well-defined practice helps. Our fund management team itself has formalized this process which is followed by all fund managers at Axis MF. There are some organizations where the fund manager is the be all and end all. But we were very certain from the beginning that we will have an institutionalized investment management set up. Fund management today is a complex business and you can’t expect a single star fund manager to do everything. We have been able to provide a lot of support to our fund managers without taking away their flexibility to innovate.
You have been the head of investments before taking over as the CEO of Axis MF. Do you still guide your fund management team?
I don’t guide them on a day-to-day basis but I do share my thought process with my team sometimes. My job is more of a risk manager. I have to ensure that my team follows the right practices. We follow a bottom up approach so in that sense it doesn’t require me to guide them on a day-to-day basis.
What do you think are the benefits (for a fund house) of a person having fund management experience vis-à-vis a sales and marketing experience steering a fund house?
Being a fund manager, I have seen different businesses across market cycles which helps me identify some key areas which drive the growth of a company. So I’m able to spot these key drivers which will help our fund house grow meaningfully and add value to investors. Having an investment experience helps me understand the nuances of this business and identify where my competitors have an advantage and how I can overcome them. But I’m sure there may be some disadvantages of having an investment expert steering a fund house as well.
You have been largely dependent on your bank network to distribute your funds when you started. How many IFAs are selling Axis funds now?
Around 50% of active IFAs in the industry are selling our funds. While our banking partner has been our largest distributor, our dependence on the bank has reduced.
The bank sponsors are not necessarily distributing in-house schemes to just help their partner. They (banks) have realized that their customers need mutual funds even though they (customers) may not have asked for it.
You have got many new first-time MF investors. What would be ratio of your investor mix (first time MF investors and existing investors)?
We have around 13 lakh investors and 20% of them would be first time MF investors. We introduce simple products to first time MF investors to bring them onboard. Rather than talking about products, we explain to them about the advantages of investing in mutual funds which helps us convert clients.
How has partnering with Schroders helped your fund house?
We don’t get too much inputs to run the local business since we have a good understanding of our market. We are advising $450 million of Schroders funds which are investing in India. We also work with them (Schroders) to advice on other funds which have an allocation to India. Going forward, we will provide local investors an opportunity to participate in global markets through feeder funds.
Many fund houses launched equity savings funds post the changes in tax structure of debt funds. Your fund house also launched a similar fund recently. There are talks of government taking away the tax arbitrage in such funds. Going forward, if the government does away with the tax benefit for such funds, do you think this category will die a natural death just like one year FMPs?
Yes, the tax benefit might go away but the product will not lose its relevance. If you rebalance the portfolio of this fund continuously over a long period of time, the fund has the potential to perform just like an equity fund.
How has your debt business impacted after the changes in tax structure of debt funds?
The inflows have been low but there is a good interest in short term category. Eventually, investors need both equity and debt in their portfolio. Debt funds still offer significant advantages as compared to other fixed income instruments. I believe debt funds as a category will grow despite the changes in tax structure.
How much share of inflows do you get from B15 locations?
We get business from 800 plus cities. So we are penetrated way beyond the B15 locations. We get around 40% of inflows in some of our simple products from B15 cities.
With many AMCs exiting MF business, do you think there is room for more consolidation in the industry? If there are a few players dominating the industry, do you think it curtails competition and innovation?
It is a hyper competitive market. In any industry either you grow or be a niche player. I don’t think the sector is large enough to support 40 AMCs today. Our industry can support 20 AMCs at best. As long as you are relevant and differentiated, you will have a place in this industry.
Do you invest your money in Axis MF schemes?
Yes, all my savings are only in Axis MF schemes.
Your roadmap for Axis MF for the next two years
We will launch some unique funds both on the equity and debt side. We will expand our team to build scale. We have revamped our sales and marketing strategy to focus on all types of distribution partners and we will continue to focus on that. I think we are on the right track.
When you see yourself occupying the top 5/10 AMC slot?
We don’t focus much on AUM growth. Our focus in on adding new customers. We are still small as compared to the top five players but we hope to enter the top 10 slot soon.
