The only trillion dollar fund house in India
DHFL Pramerica MF
WF: DHFL is attracting negative news flow pertaining to an alleged scam, and the market is clearly very nervous, given the way the stock price has come off. To what extent is DHFL Pramerica AMC impacted by these developments in DHFL – given that your US JV partner has recently agreed to buy out DHFL completely from the AMC?
Ajit: Post default by ILFS and its subsidiaries, the NBFC/HFC space witnessed a liquidity crisis of enormous proportion in the last quarter of 2018. This triggered a flight to perceived safety especially amongst the institutional investors. Investors moved assets from duration funds to liquid/overnight funds and from mid sized to large fund houses. We have also been impacted by these developments and our assets saw a draw down of over 50% during this period. As our assets were relatively skewed to fixed income, the exit of institutional clients was more pronounced in our case. None of the above will have any impact on the recently announced buy out. Pramerica Financial and DHFL have signed a binding term sheet for Pramerica to acquire DHFLs 50 percent stake in asset management company, DHFL Pramerica Asset Managers Pvt Ltd. (DPAM). The transaction is on course and will be completed subject to signing of definitive documentation, customary closing conditions, regulatory and necessary approvals.
The transaction would make DPAM a wholly owned business of PGIM, the global asset management business of PFI, which ranks among the top 10 largest investment managers in the world with more than USD 1 trillion in assets under management.
WF: We understand Pramerica is being rebranded as PGIM – Prudential Global Investment Managers. How will this impact your AMC in India? Do you see any potential confusion for Indian investors, if there are two fund houses with “Prudential” in their names?
Ajit: We do not foresee any possibility of confusion as we will use the acronym PGIM as a brand. Besides all our communication internationally clearly states that Prudential Financial, Inc. of the United States is not affiliated with Prudential plc, headquartered in the United Kingdom. Domestically we will be able to leverage the strength of our international brand. It will become easier for our partners to explain to their investors who we are.
WF: Your fund house recently attracted press coverage, being one of the AMCs whose debt funds had exposure to the Essel Group. What is the level of your exposure to the Essel Group and how do you perceive any risks associated with such an exposure?
Ajit: We have completely exited our exposure to Essel Group. As of 31st Jan 2019, we no longer have exposure to debt of Essel group in any of our schemes.
WF: Your fund house has unfortunately been weathering many a storm in recent months, none of which it appears have anything to do with fund performance. It must be quite a challenge to sail against these headwinds – how is your team coping with this and what are you and your team doing to maintain positive distributor engagement amidst these challenges?
Ajit: Transparent communication is the key in any challenging situation. I have also been traveling to various centres across the country. Our fund managers have been traveling as well. We have been frequently sharing our assessment of various developments with our partners and investors. We will continue to do so in the future as we believe that the crux of this business is trust. Communication helps build and maintain the trust. Beyond the noise, the business continues as usual. We have maintained our service standards. Our sales team has been focussing on communicating and sharing various value-added activities like videos on practice management, properties like the Dhruva Practice Insights to Power Business Goals on Wealth Forum itself (Click here). We also launched new facilities like Smart SIP a SIP with insurance which has unique features compared to competition, the Age Linked Asset Allocation Facility in addition to our existing Dynamic Advantage Asset Allocation Facility (DAAAF) to help partners to overcome the challenges posed by overall negative sentiments.
WF: As you look towards becoming a 100% subsidiary of PGIM in the near future, how would you like to differentiate your fund house in this competitive market?
Ajit: PGIM is an investment management arm of Prudential Financial Inc of USA a 140 year old organisation. The organisation endured and prospered for more than a century by keeping a sharp focus on excellence in performance, process and risk management across its offerings. We will be one of few 100% multinational AMCs in the country and the only representation from the $ 1 trillion club of asset managers world wide. Clients and partners can take confidence from our global reputation, best practices and a firm focus on expanding our retail reach through our partners across the country rather than expanding our own branches or sales teams.
The other areas where we would stand apart would be solution orientation in the form of facilities like the Dynamic Advantage Asset Allocation Facility and the Age Linked Asset Allocation Facility which are very unique as against the usual focus on only products. The DAAAF models unique and dynamic strategy of entry, exit and re-entry into the equity and fixed income asset class has given a very superior return profile and investor experience even after adjusting for tax impact.
Using our international presence we would bring the solutions that offer exposures to assets/ businesses that are not present or listed in the Indian markets. In that regard we have the Global Equity Opportunities Fund which is one amongst few funds that offer true global equity diversification as opposed to being country or theme specific. Our Smart SIP with insurance has a differentiated set of features and we offer it by default in all our SIPs. Our work around the theme of retirement has seen some unique properties like the Retirement Readiness certification that seeks to inform our partners comprehensively on investments related to this most important financial goal.
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