Don't you feel you are entering the market in a very tough environment? Entry loads have been banned and margins have fallen. The competition is stiff.
I really don't believe there is a right time or wrong time. I agree that it is challenging for the reasons you mentioned. But I do believe distributors and manufacturers will re-engineer their models to ensure that their revenues are in line with costs.

There is enough scope for increasing the width and depth of the industry. The pie can be easily expanded in a big way.
The mutual fund industry is still in its nascent stage. If you set aside UTI and their guaranteed return schemes, the industry is just around 15 years old. There is still a lot of learning to be done and a lot more people have to be reached out to. Guaranteed return and government subsidised products will eventually take a back seat to market linked products.

In this industry, it will be fund performance and brand recognition that will help a player build scale. Since the former will take a while, how do you plan to get the Peerless brand known?
The game changer for us will be to use the Peerless infrastructure efficiently. Retail is probably a segment which has not been penetrated to the extent that it should have been by the mutual fund industry, as a whole.

Peerless is present in 148 locations and has a captive audience of almost 1 crore customers. This customer base is proprietary to Peerless and comprises of middle class, SEC B and C* customers. Over a period of time as penetration increases, it will form a big chunk of the industry.

Since I really don't believe there is a right time or wrong time. I agree that it is challenging for the reasons you mentioned. But I do believe distributors and manufacturers will re-engineer their models to ensure that their revenues are in line with costs.

There is enough scope for increasing the width and depth of the industry. The pie can be easily expanded in a big way.
The mutual fund industry is still in its nascent stage. If you set aside UTI and their guaranteed return schemes, the industry is just around 15 years old. There is still a lot of learning to be done and a lot more people have to be reached out to. Guaranteed return and government subsidised products will eventually take a back seat to market linked products.

In this industry, it will be fund performance and brand recognition that will help a player build scale. Since the former will take a while, how do you plan to get the Peerless brand known?
The game changer for us will be to use the Peerless infrastructure efficiently. Retail is probably a segment which has not been penetrated to the extent that it should have been by the mutual fund industry, as a whole.

Peerless is present in 148 locations and has a captive audience of almost 1 crore customers. This customer base is proprietary to Peerless and comprises of middle class, SEC B and C* customers. Over a period of time as penetration increases, it will form a big chunk of the industry.

Since Peerless Mutual Fund is an open architecture model, we plan to use the traditional distribution channels too like the IFAs, banks and national distributor networks. It has to be a mix of all channels available. But it will take time because banks, and some national distributors, look at track record, time spent in the industry, brand, fund managers and size. So it will take a while. But meanwhile, we will tap the IFA network and the Peerless distribution system which has 30,000 active agents. Peerless is the distributor for Max New York Life and a few mutual funds. Peerless' agency force is getting educated and trained in selling funds in the right manner.

The Peerless brand is very well recognised in certain geographical areas especially Tier II and III towns and certain segments of society. It is well known amongst the institutional players also. But the brand will have to be re-emphasized and we plan to do a big branding exercise before we launch our retail product.

What retail products do you plan to come out with next?
We plan to launch something on the lines of an MIP in the next two to three months, subject to regulatory approvals. The reason being that our captive audience is more comfortable with products that are not too volatile and generate consistent returns over a period of time. Hence we will not start with a diversified equity fund that most players usually launch. Instead, we will add an MIP to our current liquid and ultra short term fund offerings.

Where do you see the growth coming from?
Percentage-wise, the growth will be in Tier II and III cities. But in terms of absolute AUMs, it will still be in the metros or top 10 cities. Let's look at the retail segment. Mumbai, for instance, would have Rs 20,000 crore of retail money but a Tier III town would have Rs 200 crore of retail money. So a 100 per cent growth in that town would mean an additional Rs 200 crore, but in Mumbai even a 10 per cent growth would add Rs 2,000 crore on absolute basis.

Is your fund house going to be one with a retail bias? How would you like your fund house to be perceived? As a research-based fund house? A stable fund house?
We have no bias. We want to be a customer focussed fund house. Our schemes will be a healthy mix of retail and institutional. We see ample growth opportunities in both segments. We shall not be blindly chasing AUMs just to be in the Top 5 or 10 in terms of size. We plan to break-even in the next five years but are not here to partake in the AUM race. It is not a healthy way to grow and does not lead to a correct mix of various asset classes in the fund house's portfolio.

Peerless Mutual Fund will stand aside based on its customer focus. Right now we are preparing to offer multi-lingual services in the call centre as well as in statements. While Hindi is what a lot of players offer, we are the first to offer it in Malayalam and Bengali. We will be known as a customer centric fund house. Our entire focus, whether it is in delivery of returns or service, will be customer focussed. We do not wish to align ourselves to a particular ideology or philosophy. What is the point of being recognised as a research-based fund house when it does not translate into consistent and good returns for the customer? We are customer focussed and “customer first” is our driving principle.

SEC: Socio-Economic Classification / SEC B & C customers: Refers to those in the moderate education and lower middle class / AMC: Asset Management Company / UTI: Unit Trust of India / IFA: Independent Financial Advisor / MIP: Monthly Income Plan / AUM: Assets Under Management

is an open architecture model, we plan to use the traditional distribution channels too like the IFAs, banks and national distributor networks. It has to be a mix of all channels available. But it will take time because banks, and some national distributors, look at track record, time spent in the industry, brand, fund managers and size. So it will take a while. But meanwhile, we will tap the IFA network and the Peerless distribution system which has 30,000 active agents. Peerless is the distributor for Max New York Life and a few mutual funds. Peerless' agency force is getting educated and trained in selling funds in the right manner.

The Peerless brand is very well recognised in certain geographical areas especially Tier II and III towns and certain segments of society. It is well known amongst the institutional players also. But the brand will have to be re-emphasized and we plan to do a big branding exercise before we launch our retail product.

What retail products do you plan to come out with next?
We plan to launch something on the lines of an MIP in the next two to three months, subject to regulatory approvals. The reason being that our captive audience is more comfortable with products that are not too volatile and generate consistent returns over a period of time. Hence we will not start with a diversified equity fund that most players usually launch. Instead, we will add an MIP to our current liquid and ultra short term fund offerings.

Where do you see the growth coming from?
Percentage-wise, the growth will be in Tier II and III cities. But in terms of absolute AUMs, it will still be in the metros or top 10 cities. Let's look at the retail segment. Mumbai, for instance, would have Rs 20,000 crore of retail money but a Tier III town would have Rs 200 crore of retail money. So a 100 per cent growth in that town would mean an additional Rs 200 crore, but in Mumbai even a 10 per cent growth would add Rs 2,000 crore on absolute basis.

Is your fund house going to be one with a retail bias? How would you like your fund house to be perceived? As a research-based fund house? A stable fund house?
We have no bias. We want to be a customer focussed fund house. Our schemes will be a healthy mix of retail and institutional. We see ample growth opportunities in both segments. We shall not be blindly chasing AUMs just to be in the Top 5 or 10 in terms of size. We plan to break-even in the next five years but are not here to partake in the AUM race. It is not a healthy way to grow and does not lead to a correct mix of various asset classes in the fund house's portfolio.

Peerless Mutual Fund will stand aside based on its customer focus. Right now we are preparing to offer multi-lingual services in the call centre as well as in statements. While Hindi is what a lot of players offer, we are the first to offer it in Malayalam and Bengali. We will be known as a customer centric fund house. Our entire focus, whether it is in delivery of returns or service, will be customer focussed. We do not wish to align ourselves to a particular ideology or philosophy. What is the point of being recognised as a research-based fund house when it does not translate into consistent and good returns for the customer? We are customer focussed and “customer first” is our driving principle.

SEC: Socio-Economic Classification / SEC B & C customers: Refers to those in the moderate education and lower middle class / AMC: Asset Management Company / UTI: Unit Trust of India / IFA: Independent Financial Advisor / MIP: Monthly Income Plan / AUM: Assets Under Management