Hybrid, solution-based mutual funds will continue to be in demand

For three quarters in a row, Hybrid, solution-based mutual funds will continue to be in demandtopped the list of the 45-member strong industry. While it is mulling of getting listed at a stock exchange in future on the lines of its peers like UTI and HDFC MF, the fund house says that it will not let lose its No 1 position in the industry. Moreover, SBI MF is getting more than Rs 1,00,000 crore from distribution channel, other than SBI. "We realise that staying as the top AMC in the country will warrant the same commitment and rigour which got us here. We are enjoying 15.5 per cent of market share as of now which has been steadily growing," DP Singh, Chief Business Officer-SBI Mutual Fund, tells Bizz Buzz in an exclusive interview

For three quarters in a row, SBI MF is on top in the industry in terms of AAUM. What is your view?

Yes, indeed we have been growing at around 19.1 per cent CAGR in the last three quarters while the industry has grown by 3.1 per cent. Also, if you look at the last five years, our growth rate (37 per cent) has been well above the industry growth (16 per cent). I owe it to our very capable teams who work with a single-minded focus on being investor centric.

It is said that retaining No 1 position is more difficult than achieving it. What is the way forward for SBI MF to retain this position in the long turn?

Our desire to work towards becoming No.1 started many years back. It has taken commitment and passion from the entire team at SBI MF to reach our goal. We also realise that staying as the top AMC in the country will warrant the same commitment and rigour which got us here. We are enjoying 15.5 per cent of market share as of now which has been steadily growing. Not a single other mutual fund house has been able to have its market share in the industry more than 14-14.5 per cent so far. The difference between us and our second competitor is 2.5 per cent at present. We are on the growth path. By the fiscal end, we are hoping this market share gap with our second competitor will go up to 3-3.5 per cent. If this happens, it will only strengthen our position further.

Recently all asset classes like equity, debt and gold have witnessed a rally. In this scenario, what would be your advice to your retail investors?

I have only one suggestion to make here. They have to continue to remain disciplined. There are so many studies that clearly suggest that if one puts one's money in a systematic manner in a mutual fund, then even if he joins the market at the highest level and continues to remain disciplined, his returns will generally be 200-300 basis points higher than any other FD investment over 3-5 years' time. Yes, the key is diversification in all asset classes to build a strong portfolio which can withstand short term market volatility well.

So far only two fund houses, UTI & HDFC, have gone public. Is SBI MF likely to get listed?

We will definitely get listed. But we haven't prepared any roadmap for the same as yet. We may consider it within next couple of years.

Of late, Sebi has come up with its circulars on rebalancing of the portfolios of multi-cap funds and introduction of flexi-cap fund. What will be its impact on the industry as a whole and SBI MF in particular?

We already have got a multi-cap fund which we will be converting into a flexi-cap fund. Apart from it, as per the new Sebi guidelines, we will be coming up with a new fund, which will be a pure multi-cap fund, subject to Sebi approvals.

Leadership entails great responsibility. So, what is your company's plan to ensure more and more retail participation in the capital market?

We have the great advantage of having the SBI brand attached to us. With such a lineage, our distribution networks become stronger not only within SBI, but also in other financial institutions for distribution of our product. There is a general perception that we get more money through SBI branches and other distribution channels don't participate in our fund house. However, the reality is we are getting more than Rs 1,00,000 crore of business from distribution channels other than SBI, which include IFAs (independent financial advisors), banks and RIAs.

Our strategy to increase retail participation has always been based on three aspects; market expansion through identifying new customer segments and geographies, creating awareness and position easy to understand products to investors and ensuring a seamless transacting experience for investors through our distribution partners and our own direct channels.

What steps have been taken by SBI MF to curb mis-selling?

In today's regulated environment, there is no incentive to distributors to churn. Thus, churning has more or less doesn't happen today. As far as mis-selling is concerned, I believe that when the distributor sells in investor interest then right selling happens instead. We undertake various investor education initiatives to explain the basic tenets of risk profiling and goal-based investments which help investors take better investment decisions. For our distribution partners too, we focus on the right training to help them suggest the most suitable mutual fund solutions to their clients. I believe that we as manufacturers must keep investors as our central focus and SBI MF is committed to this cause.

With headline inflation being persistently above the comfort zone of RBI, when do you foresee the reversal of interest rate and its impact on the MF industry?

MF industry has always worked in different cycles. We generally put money in the liquid papers. Whenever our fund manager feels that interest rate is likely to reverse, he will change the positioning of his schemes. Having said so, in the immediate future I don't foresee any reversal of the trend. I do believe that the interest rate will continue to be on the lower end only for at least next 12-18 months.

As its impact on the industry, I do believe that hybrid and solution-based funds (like children education and retirement funds) will continue to be more in demand.

Any new plan in the offing at SBI MF?

We will be coming out with a retirement fund shortly. Also, on the anvil is an US Equity FOF, which is a first of its kind offer from SBI MF.

What will be your message to the retail investors?

Discipline in investing is the key. Without it, financial goals cannot be met. Another aspect is look at mutual funds as solutions to their life goals and not use them just as products. This way they will plan right. And finally, they must become more and more aware of financial products and not just mutual funds. This will help them understand the pros and cons of the various investment options available and help them prevent investing mistakes.