WF: Industry AuM reached a new high of Rs. 8 lakh crores in Nov 09 - which few people would have predicted in Jan 09. Do you see the industry AuM crossing the magic 10 lakh crores figure in 2010?

Rajiv Anand: I think we need to face the fact that a very large part of this AuM is institutional and a large amount of about Rs 100,000 cr from banks, driven by easy liquidity conditions. What one needs to address is larger retail participation in mutual funds and not necessarily look at the total AUM in isolation. Fact remains that we don't have a very large investor base and that is a cause for concern. If the industry were to add new customers over the next 12-18 months, we think it would be a job well done. It would also help take the focus away from AUMs

WF: One of the biggest challenges that the industry is facing is that despite a sharp recovery in equity markets, net inflows are not coming into equity funds over the last few months. Why is this happening and what can be done to remedy this situation?

Rajiv Anand: One must look at total flows to get a perspective of how the industry numbers have shaped up. Yes, the equity flows have come down but on the other hand, flows in to hybrid funds like MIPs have increased . The roller coaster ride during 2008-09 in the equity markets took their toll on investors The only way to address the issue of negative flows in to equities is to have a steady book of SIPs. To build the SIP book is a longer process but the benefits are for all to see. Till that time, we will continue to witness asset class shifts depending on market volatility.

WF: 2009 saw two big developments for the industry : the ban on AMCs charging entry loads and the emergence of stock exchange platforms for mutual funds. How do you see these developments from an industry perspective?

Rajiv Anand: From having a embedded incentive structure to moving to a fee for advice model will take some adjustment and time. The true reflection of the move will show up over time and not immediately. The only point that we need to look out for is - will removal of loads lead to increase in volumes. The data currently does not suggest so but like I said, we need to measure this move over time and not from immediate data. Mutual funds are now amongst the cheapest long term investment vehicles and investors will begin to appreciate that.

WF: What do you see as the big trends for 2010 - from an AMC industry perspective and from a distribution perspective?

Rajiv Anand: From an AMC's perspective

1. Focus on brand, distribution and performance in todays time is becoming more important than before.

2. Domestic fund houses are gaining in size and acceptance amongst retail and institutional investors

3. Newer channels of distribution will emerge

From a distributors perspective

1. AMCs with existing track records and process will clearly stand to gain from a distributors perspective

2. We will see the start of controlled architecture as opposed to open architecture we have seen till now. Distributors will limit their choice of preferred partners.

3. Retail fixed income will get more focus over time.

WF: What are your plans for 2010 - products, investment management, distribution, communication? What are your key focus areas going to be this year?

Rajiv Anand: Products

We will focus on building our core product range after which we have some new ideas around hybrid offerings. We want to focus on the large deposit base sitting with banks and offer solutions that address needs of retail investors.

Investment Management

We already have strong capabilites across equities and fixed income and have a team to put together products across asset classes. Over the year we will look to populate our product suite that will meet investor needs across asset classes and time horizons.

Distribution

We continue to build our retail franchise. Today we operate out of 52 locations. We think that for the first phase of our business, we are well capacitised. We will continue to build our retail and institutional distribution capabilities. Our focus on tier 2,3 and 4 cities has paid off well. During our Axis Equity NFO, we got money from over 500 cities across 1.40 lac customers. It is one of the largest retail penetration NFOs in the recent past.

WF: A number of distributors have shifted focus to alternative products like company FDs and insurance. What can be done to get them to re-focus on mutual funds?

Rajiv Anand: Mutual fund companies have to continue doing what is right for the investor. At the end of the day, this business is all about trust, brands and distribution. Eventually we need to deilver value to an investor. Mutual funds have been doing that over the last 15 years and will continue to do so. We think that our focus should be on getting the three pillars right - brand, distribution and performance.

WF: Some observers believe that flows from Tier II and Tier III cities have more or less vanished and that business is getting concentrated back into larger cities. Is that a trend you see in your business? How adversely have market penetration initiatives been impacted over 2009 and what can be done to enhance penetration into smaller towns in 2010?

Rajiv Anand: As mentioned earlier, we collected money from 5oo cities across 1.40 lac customers with as much as 40% money coming from tier 2 and 3 cities. For firms which have distribution, brand and reach the growth in tier 2 and tier 3 cities will continue. To build a brand from scratch that travels deep is a tough proposition. To that extent, existing funds and newer ones coming in will need to relook at their business models.

WF: Platforms have been one of the big buzz words in 2009. We have seen the emergence of stock exchange platforms, the joint CAMS-Karvy advisor platform FINNET and we have an AMFI platform in the pipeline. In parallel, we have a number of super-distributor platforms meant for IFAs. In 3 years time, what role would platforms have carved out for themselves? Do you see a trend of IFAs gravitating towards platforms?

Rajiv Anand: Platforms are often a misused term. I think the right word is Aggregators. We think that there is need for at least 4-5 large aggregators in a country as large as India. Over the next 2-3 years. the role of aggregators and platforms will increase and distributors will see their importance.

WF: What are your key messages for your distribution partners as we begin a new year?

Rajiv Anand: Our message to our distribution partners is simple - we at Axis want an Axis Mutual product in every home. We cannot undertake this challenging task without the support and help of our partners.

Our commitment to our partners will be demonstrated in every step we take and I think we have taken our first steps in this direction.