Sandeep Dasgupta, CEO, BOI AXA Mutual Fund shares how lower costs will increase penetration and acceptance of mutual funds among new investors
27-Nov-2019 •Research Desk
The encouraging pace of growth in mutual funds despite the volatility in markets on both the debt and equity fronts augurs well for the future. Thanks to the distribution network of our sponsor, Bank of India, B30 (beyond top 30 cities) has always been a big focus for us.
Information is the key, and we believe that the ease of access and convenience in transaction are the determining factors for investors today. We continue to incorporate these vital elements in all aspects of our business operations. Digital is no longer an upgrade; it is, in fact, a normal requisite. However, the challenge lies in not overdoing it - welcoming new investors, without alienating your traditional base.
Impact of new expense slabs
Though the new TER slabs announced by SEBI did initially create a stir, AMCs and distributors have both reconciled to this reality. This situation does definitely impact our revenue, however, as a smaller fund house, we have always been prudent about our business expenses. We would like to believe that lower costs would make mutual funds more attractive to new investors and thus increase penetration and acceptance.
Risk control in debt funds
The credit events over the past year have no doubt impacted investor sentiment adversely. The new SEBI guidelines and industry best practices will ensure that the risks for investors are better controlled in future. At BOI AXA, we have tightened our risk budgets and designed even stricter evaluation criteria for our investment decisions. With regards to side-pocketing, we would evaluate if business requires the same in future.
Investment performance is our top priority. We believe that if we are able to provide risk-adjusted good performance that is sustained over a long period, we shall definitely attract investors and market intermediaries. Most of our funds were in the first and second quartiles till August 2018. The credit crisis and the resultant impact on the financial sector adversely impacted our funds. Our equity funds are once again getting their mojo back. I am confident that in the next three to six months, investment performance of our equity funds will catch attention of prospective investors and we shall once again aim for an upward trajectory in our business metrics.
In the institutional segment, the size of an AMC is still a major deciding factor considered by investors. However, that is not the case in the retail segment. Our expansion plans do not include any NFO frenzy. Instead, we believe that by focusing on the B30 segment, we should be able to achieve our objective and stay true to our organisational philosophy of keeping things simple.