Kotak Mahindra Mutual Fund was the tenth largest fund family in terms of assets in September 2005. Going forward, the fund house has ambitious plans to become a dominant player in the Indian mutual fund industry.
Gaining Size
Kotak Mahindra Mutual Fund has benefited with the rallying market and the fund house's kitty has grown substantially. Kotak's assets under management have risen 48.90 per cent over previous year. Its market share has gone up from 3.86 per cent to 4.10 per cent.
Kotak is a relatively late entrant in the fund management business, having launched its first funds only in December 1998. It launched an equity fund (Kotak 30), a medium and long-term gilt fund (Kotak Gilt Investment Regular) and a short-term gilt fund (Kotak Gilt Saving). After 11 months, Kotak launched Kotak Balance and Kotak Bond (Deposit and Regular). By the end of 1999 the AMC was managing Rs 1,200 crore. At the top of the tech boom in March 2000, Kotak launched Kotak Tech, a technology sector fund, and Kotak MNC, a fund that invests in multinational companies. In October 2000, it launched Kotak Liquid Regular.
The next two years were trying times for the Indian mutual fund industry as the equity markets started collapsing. For almost a year and a half, there were no new launches as Kotak focused on collecting assets in its existing debt funds. Till the end of 2003, it completed its product basket of debt funds as it launched a short-term bond fund, a floating rate fund, two liquid funds for institutional investors, a gilt fund for provident funds and trusts, and a monthly income plan. Its assets crossed the Rs 5,000-crore-mark by the end of 2003, over 90 per cent being in debt funds.
By then, the bull run in equity markets was already underway and fund companies were aggressively marketing new fund offerings. Kotak began year 2004 with the launch of Kotak Global. It also launched Kotak Equity FoF, a fund of funds investing in Kotak's mutual funds as well as some other AMCs. It also launched an opportunities fund. In debt, Kotak launched a long-term floating rate fund and a dynamic bond fund. So far in 2005, Kotak has launched a mid-cap fund, a contra fund, an ELSS and a dynamic fund of funds, which will switch between diversified large-cap equity schemes and liquid funds.
Performance
In terms of performance too, the fund house is doing well. Of its equity funds, Kotak Contra (Rs 593 crore) and Kotak Mid-Cap (Rs 346 crore) were the largest funds in September 2005. Kotak Contra invests in companies that are fundamentally sound but undervalued, and was launched in July 2005. Kotak Opportunities invests in a mix of large- and mid-cap companies, based on their performance and potential. Both Kotak Opportunities and Kotak Mid-Cap are doing quite well since their launch and are top quartile performers for the past six months. Kotak Global India invests in Indian companies that are globally competitive. This fund is a marginal underperformer to the average diversified equity fund. Its diversified equity fund, Kotak 30, has been a middle-of-the-road performer, since its launch in December 1998. On the debt side, Kotak has been a pioneer, being the first AMC to introduce gilt funds in India in 1998.
Kotak's FoF is an interesting offering. Kotak Equity FoF is a multi-manager fund of funds, which allows investors the diversification across styles and fund houses.
Though a change in executives at mutual fund companies is a given, Kotak has seen more changes in its CEO and equity fund manager in the past three-four years than the average AMC. Generally, this is not a good sign, but Kotak appears to have coped with these changes.
The Future
Kotak AMC is trying to reach more investors. During the past year, it has increased presence from 14 locations to 36 locations now, Kirkire says, "We have empanelled more financial planners, expanded our product portfolio - launched Kotak Opportunities, Kotak Mid-Cap and Kotak Contra - and very importantly have generated wealth for our investors in the past year."
For the short-term, Kotak has lined up a few products to enhance its equity offerings. The AMC is planning to launch Kotak Lifestyle Scheme, an open-ended equity growth scheme this month. This scheme will tap the benefits flowing out of long term, positive and structural advantages that India has today - economic expansion in the second largest country in the world that drives consumption as never before. In October, it will launch Kotak Cash Plus, an open-ended income oriented scheme to generate income from investment in debt and money market securities and by availing arbitrage opportunities between prices of spot and derivatives markets. And for the long-term, Kirkire has set his eyes on garnering an 8 per cent market share in the Indian mutual fund industry.
This article was originally published on October 20, 2005.
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