Not your boring fund manager

The mutual fund industry has been much in the limelight for the past year or so but for the wrong reasons. With entry loads having been banned in August 2009, more money has moved out than in, leaving managements seriously short of assets. UK Sinha, who has just been elected chairman of the Association for Mutual Funds in India (AMFI), is probably better off than most others in the game because he heads the country’s oldest and the fourth-largest mutual fund. But it wasn’t always that way at UTI Mutual Fund and Sinha deserves much of the credit for having reinstated the fund to its current position after it almost went broke. The soft-spoken and ever so charming chairman and managing director, who can discuss Ghalib for hours and is something of a writer himself, tells me over lunch that he hopes he can succeed in bringing the industry and the regulator closer.

Unfortunately it’s that time of the year when Sinha becomes a ‘temporary vegetarian’ for three months and so, although both of us would have loved to try out the hilsa specialities at Oh! Calcutta, we’re reconciled to a simple vegetarian meal at Maya, the Indian restaurant at the Trident in Mumbai. The annual break that Sinha takes from non-vegetarian food has nothing to do with religion; it’s just good for the system. Otherwise he’s a hardcore non-vegetarian, characteristic to the Kayasthas from Bihar, who’s discovered, over the years, that prawns which spawn in fresh water at the confluence of the Sarayu and the Ganges taste far better than any catch from the sea. And so we agree to redo the lunch at either one of his favourite restaurants, Trishna or Mahesh, as soon as he’s ready to force the flesh out of crabs. Of course, there’s nothing to beat his wife’s fish curry, he quips, with a broad smile, when I ask whether he misses his mother’s cooking. But then Sinha’s been a bureaucrat and spent a lot of time in the home ministry.

We’re sipping on masala chaas, having got the ordering out of the way, and I learn that my guest enjoys resolving conflicts and disputes and dealing with people; his various assignments over the years have left him with invaluable experience, especially the time when the Naxalite movement was beginning to gain ground in Bihar. Sinha recalls how, as a young officer at 26, he was dealing with tribal issues in Jharkhand and other communally-sensitive areas and also trade unions; he’s “seen from close quarters how extremist movements form and can go out of hand,” which is probably what happened in the Bhagalpur riots that he witnessed.

Life in Delhi must have seemed mundane in contrast with the experiences of his early years I say, but Sinha had his work cut out. To begin with, he had a hard time convincing sceptics in the ministry that UTI needed to be bifurcated instead of being bailed out every now and then. Once he moved to UTI in 2005, he needed to restore the morale of employees and later convince them to switch to market-related pay scales and employment terms, which wasn’t easy. The toughest part was regaining the confidence of investors and stifling rumours that the fund was being sold. But Sinha has made it work. “What I liked most was the mechanics of change management, which can be very complicated and difficult to implement,” says the CEO who holds a master’s degree in physics. The UTI chief, who has rarely missed his morning walk in the last 25 years and does a bit of yoga too, is never stressed; he says the trick is to manage expectations, instill self-belief and create a positive environment in the workplace. And that’s probably why he’s prouder today of his “happening HR department and 100% ESOPs” than the fact that the fund’s assets have grown sixfold to Rs 80,000 crore from Rs 13,000 crore when he took over. If he hasn’t gone completely grey during this trying phase, it’s because he makes time for himself; even as he walks on Marine Drive he’s unwinding to either Shobha Gurtu or Gangubai Hangal and there are the evenings for ghazals.

As we help ourselves to a typical roti-bhaji kind of meal (baingan bharta, heeng jeere aloo, masoor palak dal, boondi raita and tandoori rotis), Sinha unveils his long-term plan for UTI which now has the US-based T Rowe Price as a 26% partner. As he sees it, UTI has already begun leveraging the foreign player’s fund management expertise in terms of separating research from fund management and reorienting fund managers so that they outperform over longer time periods rather than live from quarter to quarter. The bigger gameplan is to grow the fledgling $55 million UTI offshore fund to at least $300-400 million in a year or so and further to over $1 billion by attracting large foreign institutional investors like pension funds. Sinha’s already eyeing revenues from the fees, which he believes could be about one percentage point of the assets managed. Given that most mutual funds in India are backed by banks or large business houses, UTI, he’s clear, needs to develop its own niche and build a brand internationally. Also Indian investors, Sinha points out, will want to soon diversify their portfolios with an exposure to overseas markets and that’s where T Rowe Price would be of help.

I can’t help remarking that right now small investors don’t seem to want to put in money even in their home market. Sinha agrees, saying that it’s the rest of the world’s investors who, through large institutions like a CalPERS, seem to be cashing in on the boom in the Indian market rather than small investors in India who’ve pretty much stayed away. Even in advanced countries, he points out, 80% of mutual fund scheme sales are load sales though regulators do give investors the option of not paying entry loads. “No industry can continue to survive if there’s negative growth and that’s what we’ve been seeing all these months,” he says, adding that players are stressed despite the fact that the markets are on a roll.

Coincidentally, T Rowe Price currently heads the Investment Company Institute, the US equivalent of AMFI and Sinha says he proposes to come up with a mutual fund policy for India. “It would be on the lines of a civil aviation policy—which allows airlines to run as many flights on the Delhi-Mumbai route but also requires them to service the northeast sector—or the telecom policy,” he explains, admitting that something needs to be done. Indeed, he points out that the objectives with which UTI was set up—to mobilise small savings—are not being met. “While UTI has been better off than others because we have a fairly strong branch network in the smaller towns, we also have evidence from McKinsey and BCG to show that sales of mutual funds units in the smaller towns are coming down,” Sinha asserts, adding that UTI is trying to motivate agents by paying some commission. As for sales in the metros, which originate largely from high net worth individuals, UTI’s tapping this pool by using banks as channel partners.

Neither of us wants dessert and prefer some tea and coffee instead. Sinha’s amused when I ask whether it’s true that he’s very particular about the milk in his tea. Sure enough, he measures out two spoons. The UTI chief doesn’t much care for management books, finding them somewhat simplistic and stopped reading fiction many years ago; what he does enjoy is philosophy, history and “anything to do with contemporary developments”. Right now Sinha’s halfway through Niall Ferguson, having thoroughly enjoyed Tony Blair’s biography. If there’s something that he can pick up any time, it’s the Gita. “It’s always by my side.” But Sinha’s real passion is Ghalib; he’s read every version he could lay his hands on and spends hours discussing the poet’s works with his wife and younger son, a lawyer. The CEO, who used to write prose once upon a time and also scripts for plays, recalls his days in the Lal Bahadur Shastri National Academy of Administration at Mussoorie where he was the editor of the house magazine. And he’s looking to get back to writing some day.

Source: http://www.financialexpress.com/news/not-your-boring-fund-manager/693023/0