Birla Sun Life Asset Management Company has just completed 20 years of its operation. By the end of September 2014, the company had an asset base of about Rs.1.02 lakh crore. The fourth largest AMC (asset management company) in the country is gearing up for the next growth trajectory.
A. Balasubramanian, Chief Executive Officer, spoke to The Hinduon the industry and the road ahead for the company. Excerpts:
Having recently crossed the Rs.1 lakh crore AUM. What will be your strategy going ahead? What are the measures of your success?
Crossing Rs.1 lakh crore of AUM is one of the key milestones for us. We also increased our asset base, by adding over Rs.22,000 crore of AUM, to become the No.5 player in equities. We evaluate our success in terms of increase in customer base and increase of market share in equity, in debt, and in Top 15 (T15) and Beyond 15 (B15) markets. In terms of overall market share, we are the No. 4 fund house in India today. Going forward, our focus is to take the business to the next level of growth by increasing mutual fund penetration in every market of operations. There is always room for improvement and our effort to build size continues.
You have seen some strong inflows this year. Where have these been coming from?
There is a marked interest in equity, which is a very good sign. It shows that investors are now beginning to invest in equities. We have seen around Rs.3,800 crore of inflows. Most of them have been in BSL Frontline Equity, BSL Equity Fund, BSL Top 100, BSL’95 and BSL MNC Fund respectively. Another area where we are seeing strong inflows are SIPs. We have witnessed a strong and consistent upward trend in number of SIPs since March this year. Average ticket size has also increased. We have almost grown up to 30 per cent as compared to last year. The balance inflows have been in fixed income schemes and short term debt funds.
What do you think of the market currently and where do you see it going forward?
The Indian market went through a tough time on the back of poor economic growth between 2011 and 2013. However, 2014 turned out to be one of the best years both for the Indian economy as well as for investors. We strongly believe that we are headed for a period of certainty which will not only keep the overall buoyancy in place, but will also help the economy to unlock its true potential. The power of the economy coming back on the growth path is far higher today given the fact that a lot of reform initiatives would be undertaken by the Government in the coming months. This will help attracting significant foreign inflows into the country both in the form of FDI and portfolio flows. Fortunately, the changing dynamics of the oil sector in the global market is favouring the oil import dependent countries including India in a big way.
Have you seen a change in investor outlook in recent times?
Investors’ conviction in equity has improved as is evident from their renewed interest. We are seeing equity retail participation and transaction volumes rising. Sixty per cent of interest is seen coming from new investors. In my view, investors are moving from a vanilla product to specific products. We have, over the years, developed an understanding of how customers want to be served. We have some good service initiatives, but we now need to promote them.
How have things been in the debt market?
Fixed income schemes have also been delivering better returns to investors. This has been largely generated by the portfolio managers. We have seen more inflows into debt funds during the last six months from both retail and institutional investors.
As markets touch new highs, what is your advice for retail investors?
Retail investors should look at mutual funds as a vehicle to meet their long term aspirations by investing in debt and equity mutual funds. Therefore, staying invested as long as possible is more important to meet their financial goal. And it is equally important for those who are not investing in MF, to begin investing in mutual funds across debt and equity to meet their long term aspirations. Don’t track the daily NAV and price movement. Those who have not monitored the performance on a daily basis but remained invested with confidence have achieved good returns.. It is always a good time to invest, so invest continuously and religiously. This discipline will give substantial benefit. The simplest way to invest is through SIP, which is nothing but like a recurring deposit.
You recently completed acquisition of ING AMC including its Portfolio Management Scheme. What are your plans on that front and in alternative assets?
Beyond just AUM, ING assets had the advantage of an investor base of 80,000 with another 4,000 investors in PMS. These factors led us to bid for these assets. The acquisition is now complete. As the regulator has approved the merger plan of these schemes, we could complete the transition within five months. We now look to build our PMS business along with our existing PMS products and offer an alternative investment platform to our elite customers. While doing so, we have also been simultaneously building our offshore advisory — both in debt and equity. To cater to the need of global investors on investment management advisory, we have established presence in Singapore and Dubai.
What is your experience with inflows from T15 and B15 markets?
In general, we have witnessed increased participation and increase in volume from B15 market. On a year-on-year basis, B15 contribution has increased by almost 0.5 per cent from 9.3 per cent to 9.8 per cent.
In our case, this increase is largely in the nature of increase in Systematic Investment Plan (SIP) and subscription to equity schemes. We have also seen first time investors into mutual fund, who may be beginning to allocate money to mutual fund schemes as part of their diversification from FD investment.
What are your plans to increase reach especially in B15 markets?
We are driving B15 participation through our branch network and we have also introduced the ‘Market Representative’ (MR) model. The virtual model is designed to help expand the market without having a branch.
Once the MR centre reaches certain size, it converts into a branch. This year, we have set up around 30 such MR centres across B15 locations. We have also amplified efficiency of existing branch locations by the introduction of a hub-and-spoke model. So our physical branches act as hubs to service spoke locations (smaller towns and cities) located within 80-100 km of each hub. By combining our branches, MR centres and hub-and-spoke locations, we have over 250 points of outreach at present.
Moving ahead, what do you see as the key focus areas?
It is a very well known fact that mutual funds only have five per cent penetration among 1.2 billion Indians. Driving market expansion and building a larger customer base are the key imperatives for the industry today. All fund houses put together, the industry can definitely cover 20 per cent of the Indian population as mutual fund investors. That is the kind of aspiration.
