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We are a very distribution driven fund house

Swarup Mohanty, CEO, Mirae Asset

12th September 2016

In a nutshell

Mirae Asset - once thought of as a write-off in the aftermath of the 2008-09 crisis and its impact on its ultra short term funds - has risen quite literally like a phoenix, to be seen today as a quality equity fund house and one whose funds are now on the recommended lists of most quality advisors. Swarup Mohanty says he and his firm owe a lot of their success in crossing the Rs.5000 crore equity AuM milestone to the support and faith that quality IFAs placed in Mirae Asset at a time when they needed the support most. Mirae Asset he says has always been a very distribution driven fund house and will remain that way even as it shifts gears on the back of a strong and growing equity business and an emerging focus on the fixed income side. "Keep tracking us meticulously and push us if we are found lacking in any space" says the ever modest and self-effacing young CEO of this very promising fund house.

WF: Congratulations on crossing Rs.5000 crores of AuM! Your fund house has transformed itself over the years from one that most had written off, to one that most are now keenly tracking. To what will you attribute this huge turnaround? What have been some of the important milestones in this journey so far?

Swarup: Thank you so much. Yes it has been a very interesting story so far. We are at 5600 crores as we speak. We believe we have created a good platform on which we can build a good business going forward. I would attribute this turnaround to three things:

  1. The un-wavering will of the entire organisation to see this through. We started with a very small base 5 years ago and systematically put clear, realistic goals on a yearly basis and went about achieving them.

  2. The product development process which involved consistent fund management interactions and our focus on developing each and every product the right way.

  3. The support of some very pedigreed IFAs and Banks who listened to us then and saw merit in our story. It was their support then which helped us in building consistent AUM growth.

WF: What is the break-up of this 5600 cr AuM in terms of equity, debt, hybrids and cash? How would you like this split to look like when you cross Rs.10,000 crores in assets?

Swarup: We currently manage 5600 crores of asset out of which nearly 5300 is in Equity. We have over 2,75,000 investors of which over 93,000 come through the SIP route. Our SIP book per month is in excess of 42Crs. If we have in excess of 5,00,000 investors and a SIP book size of 100 Crs per month when we reach 10,000Crs we would be very happy.

WF: What are your growth plans over the next 3-4 years? Where do you see Mirae Asset India by 2020?

Swarup: Our path for the next 3-4 years is very simple. We have to now build on each of our products. We are a fund house with focus on all our products. Our two main products till now, Mirae Asset India Opportunities and Mirae Asset Emerging Bluechip, have been able to build reasonable scale in the last two years. We feel our other three products Mirae Asset Prudence, Mirae Asset Tax Saver and Mirae Asset Great Consumer Fund should also follow the same path and build good track record. This would result in consistent investor flow in them too. Our advisors should have confidence in all our products. That is our aim.

As you are aware, Mr. Mahendra Jajoo has recently joined us as the Head of Fixed Income. We are in a good position to benefit from his long expertise in Debt Fund Management. I am sure he would be able to guide us build a focussed product range in Debt over the next year. This would help us reach out to investors in the same manner in which we have done with our Equity products.

We are also in the process of increasing our team strength in Equity under Mr. Neelesh Surana in the form of an additional Fund Manager and a Head of Research. We would also be increasing the research team.

By 2020, we would like our advisors to know us as a fund house which walks the talk on its products. We would aim to become a fund house which takes responsibility of each of its products and strives hard to give each investor a good investing experience.

WF: In what ways are you looking at shifting gears in your business to build on the solid platform that has now been laid, and accelerate growth momentum?

Swarup: I think once you build a platform of solid products and back it up with an efficient and hardworking sales and marketing team, the gears automatically shift. It is a simple business and the key remains in keeping it simple.

We have been able to build a well differentiated product range with consistent track record in Equity in India. We need to build that on the Debt side as well in the next 2 to 3 years. We will launch products only if we feel that we have the capability of building good track record in them. We do not wish to launch products to complete a product basket. We do not believe in that strategy at all.

We see the Mutual Fund investors growing exponentially in India in the next five years. The investors of today have graduated well to ask for what is good and not what is new. This is thanks to the growing quality of advisors in India. In the market of tomorrow, we see good products growing exponentially. So we feel we would be in a good position to capture this growth of the overall industry.

WF: What do you see as the key challenges to growth for your business from here on, and how do you propose to overcome these?

Swarup: The key challenge to growth, according to us, lies in the ability of being able to communicate effectively consistently. The process of fund selection is still pretty skewed to very short term past performance. The challenge of investment return versus investor return still looms large. Investors have just started aligning their investment horizons to the desired investment horizon of the funds or asset class.

So, we feel that the key to growing on a sustainable way is to concentrate of giving your investors a good investment experience. The process starts with effective and constant product communication with your advisors. Once they are updated, they would in turn be able to communicate the same with clarity to their investors. Once investors align to the Fund's investment horizon, their experience would change dramatically.

WF: We are seeing increasing flows of domestic HNI money into PMS and AIFs. How active are you in these spaces and what are your plans here?

Swarup: We are at the moment in the process of building a strong Mutual Fund business in India. The next ten years look very exciting from the growth prospects for our MF products. We would like to concentrate on our space and build a long term sustainable business with extremely strong products here.

WF: What do you see as the key growth drivers for the industry over the next 5 years? What could be potential dark clouds on the horizon that can impede growth?

Swarup: I think the Mutual Fund Industry in India is on a sustained growth path. We are already seeing good signs of the AUM shifting towards the individual investor category and this trend will only grow. At the moment it is more HNI than retail, but I see that getting corrected in the next five years. We will see more and more retail participation going forward.

We are also seeing funds developing great track record and this is instilling more confidence in our advisors and investors.

The ball is in our court now. The ability of handholding the investors during market volatility in coming times will define our growth prospects going forward. There has to be more discussions on "Risk" than "Return". Similarly there has to be more discussion on "NAV return" over "Market return". We have to communicate very clearly to all our investors, the risks involved and how they could possibly mitigate them. The investor should be in a position of comfort with his own risk profile and that of his investment. That is the biggest challenge that I see for our industry going forward. We are doing a lot of good work through our Investor Education programmes and I feel the results will show in the coming years.

WF: What is your message to your distribution partners as you gear up to harness this great launch pad that your fund house has built, and move into the next leg of growth?

Swarup: We have been a very distribution driven fund house and we intend to remain that way. Our job is to build strong products and it is upto our partners to view them on merit and allocate their investors monies to us. We will strive to keep consistency in both -our fund management and our sales process. Nearly 50% of our inflows come from the IFA segment. We have seen recent interest in us from Banks and Private Wealth firms. Our growth has happened by meaningful feedback from our partners consistently. We would like that process to continue. We are very thankful to the IFAs who recognised us at a time when we needed support the most and we cannot thank them enough. We would request all our partners to keep tracking us meticulously and push us if we are found lacking in any space. We are always open to meaningful feedback and we take them as our path to growth. On behalf of the entire Mirae team I would like to thank our partners for seeing us through some very tough times. As we stand on the threshold of building something good going forward, I would like to assure everyone that we would continue on the same path as before and that is building good and strong products.

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