The era of hero fund managers is gone

I agree that the performance of the equity funds has been troublesome; we are closely tracking that. The industry’s current pause has given us a chance to introspect.

Eight months ago, you were told to take charge of SBI Funds Management Pvt. Ltd and you came here from State Bank of India​ with no prior experience in the mutual fund (MF) industry. Was that a disadvantage?

This is the model that we follow at the SBI Funds Management, as in with all other SBI sister concerns. The managing director comes from the State Bank of India on a deputation of three-five years. Unlike my industry peers, I don’t have the advantage of being around for a long time. So it may not work to my advantage, but it doesn’t put me at a disadvantage either. At SBI, we get extensive exposure in diverse areas covering corporate, retail, international as well as investment banking. Most of us get to work outside India also. All that experience helps.

There has been a lot of turbulence in the Indian MF industry. It is going through a turning point and it’s good to join it now; I don’t think it can go down any further. Here on, it’s only going to look upwards. This gives me a good opportunity as a new CEO to focus on things inside.

Interesting, but your equity funds appear to have lost as compared with, say, around 2004 to 2006 when a former fund manager outshone.

Yes, we have slipped quite a bit over the years. There has been a paradigm shift in the MF industry; it has shifted away from the cult fund manager style. I doubt if those same fund managers, if brought in today, would be able to produce the same results in these markets. In those days, our total assets under management (AUM) were Rs. 4,000-5,000 crore. Today a single scheme is almost that much; our overall AUM is around Rs. 50,000 crore. Today, things are much more process driven, risk-focused, risk-adjusted and template-driven. Fund management today is not dependent on one or two persons. The era of hero fund managers is gone.

I agree that the performance of the equity funds has been troublesome; we are closely tracking that. The industry’s current pause has given us a chance to introspect. I think the results are slowly showing up. Our one-year performances of key equity funds are looking up and have shown improvement as against six to eight months before that.

Ultimately, I have brought my sales and investment sides closer and there is regular interaction between the two.

But isn’t that a bit dangerous given that the sales side can put pressure on fund managers for, say, short-term performances?

Of course there is a Chinese wall and in any case, the two teams engage only once in two months. When we meet, we openly share ideas. But why should the pressure come from the sales team? That pressure is already there from our distributors, from, say our biggest one, State Bank of India, which is also our promoter. If our performances are bad, they’re the first ones to ask for explanations.

Speaking of SBI, how important is it for you to be bank-sponsored in today’s scenario?

It is very comforting having the support of SBI’s 18,000 strong sales force and its elaborate branch network. But I feel sometimes,the advantages are presumed. It is not automatic. SBI may have more than 80,000 branches but I still have to show my performance to them because SBI also sells other fund house’s schemes. The brand puts a big responsibility on us and a lot of pressure.

Recently, rating agency Crisil came out with a report that said a majority of actively managed equity MFs underperformed their benchmark indices. What message does this send out to the investing community?

I don’t have a problem with their methodology; it’s pretty standard. Right now the way stock markets are positioned in India, typically you’ll see most schemes are lagging the benchmarks. But if you do the same exercise in a rising period, you’ll see all funds beating their benchmarks.

Most fund managers would be fully invested in equities because their scheme objectives won’t allow them to sit on cash. The kind of alpha (outperformance) that we generate in rising markets is many times more than the lag that can be seen in falling markets. That’s the whole idea of fund management. Otherwise if everybody hugs the benchmark, we may as well put all our money in index funds.

Source: http://www.livemint.com/2011/10/02185648/The-era-of-hero-fund-managers.html

Reliance MF looking for overseas distribution partner

Anil Ambani Group Company Reliance Mutual Fund today said it is looking for a foreign partner to sell its mutual fund products in the overseas markets.

“We are looking at partnering a global firm which will help us in distributing our products overseas,” Reliance Capital Asset Management Ltd CEO Sundeep Sikka told PTI.

India’s largest asset management company Reliance MF has presence in five overseas locations - Dubai, Singapore, Mauritius, Malaysia and the UK.

At the end of June quarter, the fund house managed average assets worth over Rs 1.01 lakh crore and had an investor base of 73 lakh.

Sikka further said that Reliance MF is in talks with various foreign individuals for investment, but did not divulge the names.

In order to promote the portfolio investment route, the government in August allowed QFIs - individual, group or association - to invest up to USD 13 billion in equity and debt schemes of mutual funds.

“We are in advanced stages of talks with a few QFIs and are hopeful of bringing them in shortly,” Sikka added.

He added that Reliance MF will continue to focus on retail customers for expansion and retail debt segment would be its focus area.

“We are planning to come out with innovative products for retail customers which would be simple. We want to cash in on the huge untapped potential that the retail segment has,” he said.

The company is also planning to come out with funds which will invest in the global equities. The company has already filed an offer document with Sebi to launch Reliance Indonesia Opportunities Fund, which seeks to invest predominantly in equity and equity related instruments of Indonesian and Indian markets.

“We are looking at frontier and developed markets as well for opportunities,” Sikka said.

He, however, added that it is only in the planning stage and would need longer term plan of the company to allow Indian investors opportunity to invest in equities of frontier economies like Sri Lanka, Bangladesh and Africa.

Reliance MF offers 22 equity scheme, 12 debt schemes and two ETFs. 

Source: http://www.thehindu.com/business/companies/article2506481.ece

AMFI to launch new portal for all mutual fund transactions

The Association of Mutual Funds in India plans to launch a portal, MF Utility, next fiscal that will facilitate transactions by customers, distributors and financial advisors in schemes offered by various asset management companies on a single, unified platform.

"MF Utility is planned to commence operations by the first week of April, 2012, subject to appropriate clearances from SEBI," Indian mutual fund trade body AMFI's Chief Executive H N Sinor said while addressing the body's 16th Annual General Meeting.

The new portal will help customers, distributors and financial advisors carry out transactions in mutual fund schemes across all asset management companies (AMCs) at one place.

Various issues, including ways to encourage overall growth of the mutual fund industry and foster increased participation by retail investors, especially in smaller towns, were discussed at the meeting.

Meanwhile, Franklin Templeton AMC President Harshendu Bindal and Deutsche AMC Chief Executive Officer Suresh Soni have joined AMFI's board as directors.

In addition, HDFC AMC Managing Director Milind Barve was re-elected as Chairman and Sundeep Sikka, the Chief Executive Officer of Reliance AMC, as Vice-Chairman of the AMFI.

In order to create awareness among investors, AMFI has been conducting various advertising campaigns across the country. Till August 2011, 3,486 investor awareness programs covering 173 cities have been organized.

"Financial literacy cannot come overnight. It is a generational game and we have to continue with this effort on an ongoing basis," Sinor said, adding that mutual fund industry can grow only if we are able to create trust within the investing public.

Sinor also said the mutual fund industry plans to create a group of respected independent individuals to look into the grievances of investors and take quick remedial measures.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/amfi-to-launch-new-portal-for-all-mutual-fund-transactions/articleshow/10207623.cms