Ashish Ranawade, Chief Investment Officer (CIO) at Union KBC Asset Management, is planning to tap first-time investors as the portfolio manager of the Union KBC Equity Fund and the new launched Union KBC Tax Saver Fund. In a conversation with Chirag Madia, he talks about his investment strategy and shares how his fund is better placed than those benchmarked against CNX 500.
What’s the rationale behind launching a tax saver fund now?
There are two things to be discussed from our perspective: one is that we are a growing Asset Management Company (AMC) and need to have an entire product basket. The other thing is that we are also marketing ourselves mostly through Union Bank channels. If we look at the profile of the investors we have got in our tax saver fund as well as in our equity fund, bulk of them are first time investors to mutual funds. So, given the fact that we are reaching out to investors who are venturing for the first time, it becomes imperative for us to give them the entire product basket.
Apart from that, we have only one distributor which is Union Bank; so for them (Union Bank) it is equally important to offer investors the entire range of products. In the tax saver fund we have approximately 12,000 folios and as I said, majority of them are first time investors.
As a new fund sold only by Union Bank, how did you collect Rs 33 crore?
We are not dissuading anybody from selling our funds, but we are also not offering them anything as commission that will make it attractive for them to sell our funds. So, except for a few direct investors coming in, most of the funds are being sold only through the Union Bank channel.
Investors have a wide array of proven tax savings funds to choose from. Why should they invest in your fund?
First and foremost, we will be reaching out to those investors who have never been approached earlier as we have done in the case of our two equity funds. Secondly, the onus lies entirely on us to give the investors best returns and deliver our best.
If asked, can you list three points as to why the investors should invest in Union KBC Tax Saver fund?
One advantage certainly is the ongoing tax season in which investors can save tax. But in addition to that, there is a three year lock-in period, which also lengthens investors' perspective. We believe that the three-year horizon itself is a winning proposition from the investor’s point of view. As in ELSS schemes, investors can’t get out soon and over longer periods equities tend to perform better, which is also an added advantage for investors investing in tax schemes. Also, from a fund manager's viewpoint, we can build a portfolio with a long term view in mind which can provide good returns to investors.
But then, how will you build a portfolio once Direct Tax Code (DTC) comes in, where there will be no special benefits to Equity Linked Saving Schemes (ELSS) schemes.
It’s difficult to speculate on that and we have to assume that existing provisions will continue.
What investment strategy do you have in mind for the fund?
The fund is benchmarked against Bombay Stock Exchange (BSE) 100 and the immediate task for me is to beat the benchmark over the longer period by good margin. Having that target in mind, the portfolio construction will be more of a bottom-up approach. We also have the liberty to invest in mid-cap stocks which can be 30 per cent of the portfolio. But we will be also looking to accumulate some good stocks which are not very liquid, but have great potential over the longer period of time as they won't be favoured by other investors due to their low volumes. As the corpus of the fund is around 33 crore and keeping the fund perspective in mind, most of the stocks will be very liquid.
Many tax funds are benchmarked against CNX 500 which gives them an opportunity to diversify, but in your case it is limited to BSE 100. Will it give enough chance to diversify the portfolio?
As I said, this fund will not follow close benchmarking approach but instead the bottom-up approach. So even if I deviate significantly from the benchmark, I am not too worried as I have a three-year horizon. Also, when someone has as broad benchmark as CNX 500, it becomes very difficult to track the performance vis-à-vis the benchmark. But when you have a benchmark like BSE 100 it is easier to evaluate how the fund is performing compared to the benchmark.
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