You have worked in different countries. How is the Indian MF industry different?
In my previous roles with the Robeco Group, I had the privilege to see a number of asset management markets and all markets have their own characteristics and needs. There are a number of elements that I believe characterize the Indian market:
- The focus on investor education: Given the relatively low penetration of mutual funds in India, a logical topic to be high on the agenda for all market stakeholders. I found it especially encouraging that the regulator also has been helping the industry to grow by allowing additional TER.
- AUM over profitability: It has been interesting to see the focus on AUM gathering in India. This seems to be driven by a high competitive spirit between market participants and substantial M&A activity (as in India a price is paid for AMCs as a percentage of AUM). In these circumstances it is difficult for new players to generate profits and you run the risk to lose eye for investor interest if the pressure to raise assets becomes too high. In an industry which is in its development stage, investors could lose trust in mutual funds if AMCs take too much risk in portfolios to outperform their peers and/or mis selling. This in its turn could endanger the long term growth of the industry.
- Speed of change: I have seen more changes in the MF industry in India in the past three years than I have seen in the 10 years before that in Europe! I really admire our distributors for how they continuously deal with the changes in compensation, regulation and operational processes. People in the Indian asset management industry are much more accustomed to adapt to change than other countries I have seen. However, I do believe that the industry will grow faster with a bit more stability to enable all industry participants to plan long term, just like investing.
- Opportunities: The Indian asset management market holds a lot of potential for mutual funds to become a much wider used vehicle for financial planning. Given the expected long term decline in interest rates and the positive growth prospects for companies and growth of the middle class in India, I believe our industry is in a sweet spot for the coming years. The developments around the pension market are especially interesting given the rapidly changing social structure and fertility rates. Asset managers traditionally have played a major role in enabling people to retire with a decent lifestyle.
- Fewer number of AMCs/products: I seem to have a bit of a different view than most on the number of asset management companies in India as I think it’s really low given the size, growth and potential of the Indian asset management industry. In Europe there are over 1,700 AMCs that manage around 35,000 funds, a stark difference with the 43 managers in India. Even in a small country where I am from, The Netherlands with a population less than Mumbai, investors have much more choice to build a portfolio to cater to their respective needs. Having that many providers and funds will not make it easy for investors to find the right fund for them. However, I believe that advisors and distributors will be the key in giving investors access to the best mutual funds as making the right portfolio requires specific knowledge. The more AMCs that help to develop that knowledge the better in my opinion especially when Indian investors will start to invest more into international funds to further diversify their portfolios.
How is the Indian investor different or similar in her behavior & attitude?
I believe investor behavior throughout the world is similar when it comes to greed and fear. When these emotions get a grip on investor behavior they are not always the best guide to make changes to your investment portfolio. What does vary across the world is the allocation of capital towards different asset classes. Investors in India tend to have more money invested in gold and real estate compared to other countries and will have less equity and international investments. I also see Indian investors trade more than in other countries which make turnover in portfolio higher.
What best practices has Robeco brought in Canara Robeco AMC?
Robeco’s advantage is that it only focusses on asset management, the group doesn’t have any banking and/or insurance business which helps us focus on what we want to excel at: having our clients achieve their investment goals. Since Robeco has been in asset management since the 1930s, the group has been able to use that experience in every field of asset management. This ranges from a sound research driven investment processes, robust risk management and a client centric approach in sales. I’ll share two concrete examples; firstly our sales targets are set heavily on so called “net new money”, which means that it is as important to keep existing clients happy as it is getting new client acquainted with our products. Secondly, we like to be in business over the long term so we do not want to depend on outside factors to run our business; this may sound simple and obvious but we didn’t have to make use of the emergency borrowing window when interest rates showed heavy volatility in the past. This means that we monitor our risks closely. There are many more examples like this in our day-to-day work to serve our clients best.
Where do you invest your money?
Since my time horizon for investing is 15-20 years, I tend to take more risk than most. My portfolio is 80% equities and I tend to invest when markets are overly worried about a certain country, sector or theme. A strategy that might not suit most as investing is all about knowing your time horizon and risk appetite. Sometimes, I also catch myself in more irrational allocations like investing close to home; I have a disproportionately high allocation towards India as it is close to my heart and I also believe this country has a very bright future. Being close however doesn’t always mean that it is safer as India felt much less safe to invest in when I was living in The Netherlands. That’s why it is always good to have a trusted advisor to help you build your portfolio.
Which is your favorite holiday destination in India?
I have been fortunate to see many parts of the country during the past years and I have liked many of the places that I have been as each city and region has its own charm. But I am not going to dodge the question so if I would have to name one I would chose Bandhavgarh, that first look at the magnificent Indian tiger is one to never forget.
Which is your favorite Indian cuisine?
Definitely the murgh makhani with naan and mixed vegetable raita!
Do you watch Bollywood movies? If yes, who is your favorite actor/actress?
I love to go to the movies and have certainly tried a number of Bollywood movies like Chennai Express and Dhoom. Although I have taken regular Hindi classes the movies in the theaters do not carry subtitles which make it sometimes difficult to understand certain jokes and improve on my Hindi. This makes for interesting moments when everybody bursts into laughter and I’ve missed a few words.
How do you unwind?
Movies and definitely playing some sports. Tennis is one of my favorite sports but there are many more I like to do as I feel that mental balance is reached by a positive attitude combined with regular exercise.
