We will be super accessible to our distributors
Baroda Pioneer AMC
Anthony’s brief to his team as Baroda Pioneer transitions (subject to regulatory approvals) to a 100% subsidiary of Bank of Baroda, is to keep it simple and execute well. That means a strong focus on consistent fund performance, remaining super accessible to distributors to strengthen engagement and ensure smooth service delivery. The AMC which is one of the few in the industry to have a higher proportion of AuM from IFAs compared to banks and NDs, will seek to strengthen its bonds with the IFA segment, which as Anthony says, has contributed very significantly to the way that lakhs of Indian households now think about their long term investing needs.
WF: Welcome to WF! What is the roadmap you have charted for your AMC over the next 5 years? What is the broad mandate from your Board to your team?
Anthony: Thank you and it is great to be part of Wealth Forum. The roadmap for us over the next few years is clear – and that is to build out our presence in terms of retail business, and consolidate what is a reasonably successful institutional presence. The broad mandate set for us by our shareholders is to reach a market share of 1% or higher by 2022, and in doing so become a Top 15 player by assets. We have made a lot of progress in recent years in terms of growing long-term assets, and if we continue to execute well, we are confident of getting there.
WF: You have always been known for having your ears very close to the ground and for getting the pulse of the industry and its distributors. Are you getting any sense of anxiety replacing the exuberance witnessed in the industry in 2017?
Anthony: Not really. Most people in my view remain bullish on the long-term prospects of the industry, and are factoring the possibility that this year may be challenging, but there is a quiet confidence that they will ride this phase out. Perhaps the biggest positive to arise out of the many changes we have witnessed over the years, is that most distributors have demonstrated that their business models have the required resilience and flexibility to adapt, and hence the belief that this too shall pass.
WF: A key industry concern now is the nervousness among lakhs of new equity fund investors who are perhaps witnessing their first significant market correction, and the first occasion when their 1 year SIP returns are turning negative. What message would you want distributors to give to these investors at this juncture?
Anthony: To me, it is the same message for all investors, not just the first time investor. Successful wealth creation requires time in the market, and not timing, and there is enough evidence to support this argument. Beyond this, one suggestion I would give is that for these first time investors, try to introduce them to lower duration or accrual funds as well, so that their experience and perception of mutual funds is not influenced only by short-term volatility in equity markets. The goal should be to ensure that mutual funds become their key and dominant financial asset, whatever be their long-term objective.
WF: What impact do you see on the industry from product rationalization, TER reduction, LTCG and DDT on equity oriented schemes and removal of B-15 incentives from cities ranked between 15 and 30?
Anthony: This question itself deserves a separate column, given the many moving parts. In summary, I would say product rationalization creates a level playing and transparent field, which should be good for all stakeholders, especially investors. TER reduction will hurt margins, but I expect volumes to compensate. LTCG may affect sentiment in the short term, but should be fine in time. Case in point is investors adjusting to the longer three-year period for debt funds a few years back, when at the time some sceptics felt it would be a big negative. On B-15 moving to B-30, I wish it would have remained unchanged, penetration in these markets is still very low, but it is reality and this in all likelihood is an incentive that will cease to exist in a few years, and we need to plan accordingly.
WF: How has FY17-18 been for Baroda Pioneer? What are some of the hits and misses of the year for your AMC?
Anthony: It has been a reasonably good year. We have grown largely in line with industry. A big positive for us has been the uptick in our equity performance, which has led to decent flows. We have made a number of changes to our equity investing process, and that is starting to pay off. Fixed income continues to be a strength for us, especially on the accrual side. Misses I would also see in the same context. We have made progress in terms of investment performance and retail flows, but could have been better.
WF: What are your plans as you step into the new fiscal? What more and new can we expect from your fund house?
Anthony: First big change for us will be in terms of ownership. We will become a 100% subsidiary of Bank of Baroda subject to regulatory approvals, and that potentially will give us greater access to retail flows. We are investing in a new technology platform, as we exit our current joint venture, so am hoping that it helps us become more relevant from a digital perspective. Also, a number of new products to complement our existing suite, given that we have a number of opportunities in the new product regime. Lastly, and to me this is most important, if we can continue to improve our performance delivery, goal will be for our sales team to position ourselves as an fund house for many IFA’s to consider on the equity side, much in the same way as we have done with fixed income in 2016 and 17.
WF: How do you plan to create a niche for your fund house in distributor mind and market share in this hyper-competitive market?
Anthony: We have seen many examples in our peer group, where the right product and performance, complemented by a hard working sales team, and efficient service leads to disproportionate mind share and then market share over time. Hence, our focus would be on doing the simple things well. We need to deliver consistent investment performance, be super accessible to our distribution partners, service efficiently and the right outcome will follow. One of the very unique things about our AMC is that our AUM from IFA’s is actually higher than AUM from banks and ND’s, and that clearly tells us that we have a brand and proposition that seems to work well with the IFA community, goal is now to build on that.
WF: With SEBI signalling a clear intention to segregate advice and distribution, how do you see intermediation models developing in the HNI and retail segments going forward?
Anthony: I think the MFD model will become the preferred route, across segments, if regulations come through in line with the recent consultation papers. Some may choose the RIA route, but I think the MFD route is best suited to take mutual funds penetration to the next level. It has become fashionable in some sections to criticize the distributor model, but one only needs to look at factual data especially from the IFA channel to understand the true contribution made in changing the way Indian households now think about their long term investing needs.
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