Birla Sun Life Mutual Fund has retained its number 5 position among the top five fund houses, though its corpus declined by 3 per cent to Rs 47,096.23 crore as at end March. Birla MF is working on schemes that will act as a hedge to the market volatility and safeguard investors against capital erosion. ET spoke to Chief Executive Officer Anil Kumar to know more. Before shifting to Birla MF, Kumar was global head of Citibank’s NRI business last three years. He is an alumnus of IIM Ahmedabad and NIT Warangal.
Excerpts from the interview:
Q. What is your road map for the future in these troubled times?
A. We will continue our focus in launching innovative products capable of hedging against volatility in the market. We are looking at re-launching old schemes on similar lines, and are exploring the possibility of launching arbitrage and exchange traded funds.
We have consistent policy of declaring dividend in our schemes. Whenever we have surplus income, we will keep declaring dividend. Birla Sun Life Tax Relief ’96 declared 50 per cent dividend in 2008-09 despite these troubled market times. It was 200 per cent dividend in 2007-08.
Q. What do you give priority in running your AMC?
A. We give top priority to portfolio quality and security, size of fund corpus and ultimately our brand image. Identifying customer needs at the right time is a crucial aspect. Recession helped big fund houses to prove their worth in this respect.
Anticipating effects from the collapse of Lehman Brothers, we launched a short term debt fund that would invest in commercial deposits and commercial papers of PSU banks in the third week of September 2008. By October, it managed to raise Rs 3,800 crore from all classes of investors despite the economic turmoil.
Q. What prospects do you see for sustainability of the MF industry in India?
A. MF industry is in a “sweet spot” in India but it has a long way to go, as penetration is still very low. However, the market potential is huge. Only 5-6 per cent of household deposits in India find their way to MFs, which is lower than even the BRIC countries.
In the last five years, the industry has been growing at CAGR of 35 per cent. The future of the MF industry lies in Tier-II and Tier-III cities. The rate of deposits in these cities is proportionately higher, irrespective of market condition. Tapping this source will help MF grow manifold.
Further, opening up of the pension funds will help increase mutual funds reach. As a fund house, we will be looking at these new avenues to expand our product kitty.
Q. What are the product offerings you plan for smaller cities?
A. We are mostly promoting systematic investment plans through different equity schemes. We are also selling balance fund and debt schemes. We approach investors with two-pronged communication: 1) invest with 3-5 year time horizon 2) diversify your asset allocation with a mix of equity, balance and debt schemes.
Q. What sectors are you looking at for investment growth?
A. We look at sectors from a long term perspective. Infrastructure, FMCG and capital are three good sectors to look at. Realty, though currently going through a correction phase, has huge potential as there will be huge demand for housing in the long run due rising urban migration.
Q. Is the recently market rally indicative of a recovery?
A. It is difficult to take a definite call on this. Any negative global cue and uncertainty over general elections can play spoilsport. With sectors like steel, auto and cement showing signs of improvement, we however see revival/stability of economy by last quarter of the current calendar year.
Q. Can the MF industry, along with insurance companies, be an alternative to FII dominance in driving equity indices?
A. MFs and insurance companies are growing at a much faster pace. There is scope for further growth given the large untapped market space. During Q3 of FY 2008-09, MFs were sitting on cash of around Rs 15,000-20,000 crores. Had the same amount been invested in equities, it could have diluted FII impact. Larger participation by domestic institutions can definitely counter FII impact.
Excerpts from the interview:
Q. What is your road map for the future in these troubled times?
A. We will continue our focus in launching innovative products capable of hedging against volatility in the market. We are looking at re-launching old schemes on similar lines, and are exploring the possibility of launching arbitrage and exchange traded funds.
We have consistent policy of declaring dividend in our schemes. Whenever we have surplus income, we will keep declaring dividend. Birla Sun Life Tax Relief ’96 declared 50 per cent dividend in 2008-09 despite these troubled market times. It was 200 per cent dividend in 2007-08.
Q. What do you give priority in running your AMC?
A. We give top priority to portfolio quality and security, size of fund corpus and ultimately our brand image. Identifying customer needs at the right time is a crucial aspect. Recession helped big fund houses to prove their worth in this respect.
Anticipating effects from the collapse of Lehman Brothers, we launched a short term debt fund that would invest in commercial deposits and commercial papers of PSU banks in the third week of September 2008. By October, it managed to raise Rs 3,800 crore from all classes of investors despite the economic turmoil.
Q. What prospects do you see for sustainability of the MF industry in India?
A. MF industry is in a “sweet spot” in India but it has a long way to go, as penetration is still very low. However, the market potential is huge. Only 5-6 per cent of household deposits in India find their way to MFs, which is lower than even the BRIC countries.
In the last five years, the industry has been growing at CAGR of 35 per cent. The future of the MF industry lies in Tier-II and Tier-III cities. The rate of deposits in these cities is proportionately higher, irrespective of market condition. Tapping this source will help MF grow manifold.
Further, opening up of the pension funds will help increase mutual funds reach. As a fund house, we will be looking at these new avenues to expand our product kitty.
Q. What are the product offerings you plan for smaller cities?
A. We are mostly promoting systematic investment plans through different equity schemes. We are also selling balance fund and debt schemes. We approach investors with two-pronged communication: 1) invest with 3-5 year time horizon 2) diversify your asset allocation with a mix of equity, balance and debt schemes.
Q. What sectors are you looking at for investment growth?
A. We look at sectors from a long term perspective. Infrastructure, FMCG and capital are three good sectors to look at. Realty, though currently going through a correction phase, has huge potential as there will be huge demand for housing in the long run due rising urban migration.
Q. Is the recently market rally indicative of a recovery?
A. It is difficult to take a definite call on this. Any negative global cue and uncertainty over general elections can play spoilsport. With sectors like steel, auto and cement showing signs of improvement, we however see revival/stability of economy by last quarter of the current calendar year.
Q. Can the MF industry, along with insurance companies, be an alternative to FII dominance in driving equity indices?
A. MFs and insurance companies are growing at a much faster pace. There is scope for further growth given the large untapped market space. During Q3 of FY 2008-09, MFs were sitting on cash of around Rs 15,000-20,000 crores. Had the same amount been invested in equities, it could have diluted FII impact. Larger participation by domestic institutions can definitely counter FII impact.
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