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The best indicator of an advisor's call on a fund house

Swarup Mohanty, CEO, Mirae Asset MF

1st Jun 2017

In a nutshell

SIPs are forward calls on a fund house by advisors and investors says Swarup, who therefore tracks this number closely. He therefore rates the explosive growth in Mirae Asset's SIP book from Rs.29 crs to Rs 106 crs in FY16-17, as one of the most significant achievements of a landmark year for his fund house. A strong believer in one product per category, he is in no hurry to expand his equity book, but would rather have an approach where every product in a limited suite is always a focus product. Debt is a category he expects to add more products and build scale in this fiscal. His message to his team is clear - deliver on the expectations that advisors and investors have and continue to justify their trust and confidence.

WF: How has FY16-17 been for Mirae Asset? What would you say were the biggest wins and losses for your fund house last fiscal?

Swarup: Last year has been a landmark year for us at Mirae Asset. We saw our AUM growing ~175%, from 3,450 cores in March'16 to close to 9.500 crores as on May'17 with very good market share growth across all our fund categories, We were not only able to establish our two flagship products (Mirae Asset India Opportunities and Mirae Asset Emerging Bluechip), but we also grew the AUMs of our two new products Mirae Asset Prudence Fund and Mirae Asset Tax Saver Fund grow. So we now have four good products for our advisors and investors in Equity.

Last year saw us doing a soft closure on our Emerging Bluechip Fund. We stopped accepting fresh purchases and restricted the inflow only in the form of SIPs upto Rs.25000 per investor. This was a decision taken to safeguard the interests of our existing investors as the fund had started receiving unprecedented flows. The decision showed our committment towards safeguarding our investor's interests. In the future if any such circumstances arise, we would not hesitate in doing the same.

It has also been a good SIP year for us too. Our monthly SIP inflows were at 29 Crs at the end of March 2016. Today we stand in excess of 106 Crs per month. To us, this is our most significant achievement, as the SIP is a forward call on an organisation by both advisors as well as investors. We are extremely happy to see the faith in us growing from advisors and investors.

We also took our first step on completing on fixed income product offering, with a successful launch of Mirae Asset Dynamic Bond Fund in the last financial year.

We hope to build on all successes in this financial year as well.

What are your business plans for this fiscal? What does your product pipeline in the equity and hybrids space look like?

Swarup: We feel our product line in the Equity space is complete at the moment. We have four distinctly positioned funds and we have no wish to dilute the positioning of any one of them. We remain a one fund per category fund house. With us now standing on the threshold of entering our tenth year of Fund Management in India, we feel our story is beginning to take a strong shape.

We believe that all our products should be good for investments every day. We are a fund house where all our products are in focus all the time.

How is your fixed income business shaping up? How do you see this piece growing in the next 3 years?

Swarup: With the investment horizon for investors now extending to three years in Debt, we see a lot of scope to build a strong and sustainable portfolio of products. We launched the Mirae Asset Dynamic Bond fund in March and we have seen good interest in the product so far. It is a product aimed at maximising investor returns over a three year horizon. Over the next three years we intend to build this product in the same way as we have built our other products. The objective remains to show consistent returns and then put ourselves in a position where we can provide good investment experience to our investors. We would subsequently add further to our Debt product basket, and are hopeful that by next year we would put our entire product offerings in place.

There are many experts who believe that the large influx of first time investors who are now coming into the industry are perhaps better served through dynamic asset allocation funds rather than the traditional equity SIPs. Do you subscribe to this view?

Swarup: It is very important that first time investors into Mutual Funds get a good experience in order to enable them to allocate their right wallet share to us. They have to be handled with a lot of care and given simple and right products which would adhere to their risk profile. A dynamic asset allocation is a strategy which can be suitable for pedigreed investors who have experienced markets and not first time investors who need to understand markets first. So for first time investors, it has to be the traditional SIP route rather than a dynamic asset allocation strategy.

The industry in general is very optimistic about market and business prospects over the next couple of years. Amidst this optimism, what worries you as potential party-poppers? What should we watch out for or be careful about?

Swarup: Though the markets and the investor inflow have been very good in the last three years, it would not be wise to take this situation for granted. All successful businesses are built on paranoia and we at Mirae Asset are no exception to that. As the number of investors grows with us, the fiduciary responsibility too grows immensely. It is never prudent to predict markets and one should never get into that discussion. The right discussion to get into would be that of the investor experience one and the responsibility that we carry on giving him a good one. The problem happens when the communication on your products is not clear and investors exit without a good experience due to lack of understanding. Our success will depend on whether we communicate well at all points of time and then get the investor's horizon to match with our fund's investment horizon.

Luckily for us two great things have happened in the last five years:

  1. The conviction level of Advisors has increased dramatically on the respective Asset Classes. This has led to increase in the investment horizon of investors. This would be the main reason towards the change in investment experience for the investor.

  2. We have learnt from the stoppages of the SIPs post the 2008 crash. This has resulted in SIPs now coming for a longer horizon and the investor is fairly aware of the benefits of market volatility. This is resulting in the monthly flows of SIP growing and the entire industry is benefitting from it.

We at Mirae Asset have benefitted from the above in a big way. The money which has come to us has been fairly sticky and our SIP book has been growing each month.

All the above will be tested in case we see serious volatility in the markets. The person, who stays calm then and sticks to fundamentals at that time, would be able to create superior wealth.

What more can your distributors expect from Mirae Asset this fiscal?

Swarup: We have been a very distribution driven fund house and we intend to remain that way. Our primary job remains building strong products which we will continue to do. What we have seen over the last two years is recognition of this process by some large IFAs across the country. We have seen significant AUM build up from many of them in our funds. Clearly the responsibility now shifts on us to deliver on their expectations.

We are in the 9th year of Fund Management in India and we believe the first major landmark for us would be to cross 10 years of Fund Management in India. In that tenure we would have built our core business and principles in the minds of our partners. If we can then build on these principles for another 5 years, then we feel our inflection point would happen in April 2023, when we would complete 15 years.

So I request all our partners to continue tracking us and giving us feedback like they have always done. They should continue to expect our total focus on all the products that we manage and I sincerely hope that we continue to maintain the consistency which we have displayed in all aspects of our organisation over the last few years.

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