The past one year has disappointed equity mutual fund (MF) investors. What is the reason behind it and how did they react?
Swarup Mohanty: Yes, capital markets have been volatile over the past one year. Both debt and equity markets are giving flat returns due to the sharp rise in oil prices, currency fluctuations and the constant fear of a trade war. In fact, equity markets had a limited run, with only a handful of stocks moving up. Also, midcap and small-cap stocks corrected significantly during this period. Overall, the markets have not been favourable from the returns perspective, but it is heartening to see the change in investor behaviour. People not only stay invested but also accumulate equity at dips to grow their wealth.
With the Lok Sabha elections scheduled for 2019, what are your expectations from the markets? What would be your advice to investors?
Stock prices eventually tend to follow corporate earnings. Elections happen every five years, but in the long run, you will find little correlation between polls and fund performance. However, there could be some short-term impact. Markets are expected to remain volatile due to the prevailing global scenario. Again, foreign institutional investors continue to sell across emerging markets and that is worrying. As a result, markets could see an extended correction period and investors need to be patient. Wise investors should use market volatility for equity accumulation.
Capital markets regulator SEBI has recently tweaked the definition of small town from B15 (beyond top 15 cities) to B30. Will it affect MFs?
I don't think it will impact the business in a big way. We need to attract new investors whether they are in B30 or not. Even top cities are underpenetrated at times, and that is happening in spite of the MFs delivering satisfactory returns over the last 25 years. So, here we see a huge communication challenge and we must overcome it to reach more investors. However, the 'Mutual Fund Sahi Hai' campaign has certainly helped.
What about fund reclassification?
We have always been a one-fund-per-category organisation and the SEBI mandate did not affect us much. One of our funds, the Mirae Asset Emerging Bluechip, got reclassified to the 'large and midcap' category as it had held nearly 25-35 per cent large-cap stocks since its inception. The fund has a great future in the new category and we will carefully design its journey.
Some of the fund houses are offering life insurance along with MF schemes. What about Mirae India?
We think investment and insurance are two different categories. From an investor's point of view, both are important, and that is why they should be treated differently. We don't believe in bundling them, but we always encourage our investors to buy insurance as per their requirements and invest in MFs as per their wealth creation targets.
What is your road map for the next three years?
Currently, we are assessing the retirement fund category as it could be the most preferred channel of the millennials who are keen to invest for a secure future. Plus, we have started working on the alternative asset side by launching a real estate fund this year. We will broaden our offerings in AIFs and also start a sustainable exchange-traded fund business in India. Apart from the $3 billion (over `20,000 crore) assets under management in India, we also provide advisory services for over $1 billion of assets in India-specific funds.
Your debt assets are still minimal compared to equity. How will you increase it? Will you launch more schemes?
We have started selling debt products over the past two years and now we manage close to `4,000 crore. We are also in the process of adding meaningful products. Post the SEBI categorisation, the landscape has changed and we are watching it closely to see how it plays out in terms of investor behaviour. Mirae Asset India has recently added a short-term and a dynamic fund, and we are working on them to create a good track record. That will lead us to more assets.
Your company also offers a digital platform for investors. Has it gained traction?
Our clients prefer a platform that features all investment options, something that you won't find on a standalone app provided by an asset management company. So, we have made our website investor-friendly and we are upgrading it constantly. We have recently added a feature called distributor-initiated transaction and it has seen excellent traction. Today, our website is a constant source of business and 15 per cent of our investors are actively using it. In the past couple of years, we had more than 1 lakh online SIP registrations via our site. Out of our total folios of 11 lakh (approx.), around 49 per cent are digital and include investors from all aggregators (NSE, BSE and MF Utilities) and all distributor platforms that send us data in the digital form. We expect things to grow at a faster clip as advisors and investors now prefer the paperless route.
What are your plans to attract the do-it-yourself (DIY) generation of investors?
The DIY generation has grown in India because of the rapid technology adoption and it has made life easier for all. But here is a word of caution on the risks involved. It is okay to be a DIY investor if you are capable of assessing your goals. If not, you should find a professional advisor. Investors should clearly understand their risk-return profiles in sync with their financial goals and then get into investments. Your investments should not be solely based on past returns.