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As the race to manage more money intensifies among fund houses, this over a decade-old AMC is at a crucial juncture of its evolution. With the acquisition of Alliance Mutual Fund, the fund house has got some star performers. A complete product basket, strong brand recall and a huge asset base of over Rs 12,236 crore mean Birla Sun Life Mutual Fund has enough ammo to beat the best in the business. It aims to become one of the five best in the industry, catering to the needs of all sections of the investing community.
Growth
Though the market share has shrunk from 6.97 per cent on October 2003 to 6.13 per cent now, Birla Sun Life Mutual Fund has seen robust growth in terms of absolute numbers in the last two years. Today, it's the sixth biggest fund house of the country. The addition of Rs 1,420 crore of the Alliance Mutual Fund assets has helped. The fund house has lagged behind some of its aggressive peers who have mopped up huge sums by launching new equity funds. Birla Sun Life on the other hand has launched only two funds-Birla India GenNext and Birla Top 100. Both schemes had decent mobilisation and today contribute over Rs 1,000 crore to the AMC's corpus. However, the above two funds and schemes of erstwhile Alliance Mutual have strengthened the equity portfolio of the fund house-for example before the launch of the two funds, equity assets used to account for only 14.76 per cent of the total assets of the AMC. Now, they are at 24.98 per cent. A strong brand recall has helped. "Over 600,000 investors repose trust in us. That itself is an eloquent testimony and we hope to grow on this," Birla Sun Life Mutual Fund CEO S.V. Prasad told Value Research.
Performance
The fund house scores a point on the debt side. Its liquid funds too offer one of the best investment opportunities in the segment. However, as we move to the equity side, the picture looks less attractive. The fund house needs a star performer. It has a decent tax-planning fund in Birla Equity Plan. Birla Midcap too has performed well. But both of them are yet to attract substantial investments.
However, it's a different story now. With the acquisition of Alliance funds, the AMC has got some star equity funds. Birla Sun Life Basic Industries, Birla Sun Life Buy India and Birla Sun Life Equity have good performance record and might set the ball rolling for the fund house. But maintaining the performance of these funds and retaining investors is a big challenge for the AMC, which has an average record of managing equity funds. None of the Alliance fund managers have been retained and therefore it would be interesting to watch how the fund house tackles this shift.
Prasad believes it's not that difficult. "Apart from the fund manager, the investment team, the investment process and the adherence to the fund objective by having and following the investment template are all very important. Our own Birla Advantage Fund, which has been in existence for more than 10 years, has seen three fund managers since inception. Yet, the CAGR return on monthly SIP since inception, i.e. 127 months, is 28.52 per cent a year as on September 2005, which I believe is comparable with other funds of similar vintage," he adds.
"Discipline is very important, and it gets institutionalised by adhering to the investment template which is studiously followed once the processes get institutionalised. Therefore, a good, robust, institutionalised company will have all this and more and that's precisely how good, reliable brands are built," he says.
The Road Ahead
It's said that a fund is as good as its manager. By acquiring Alliance funds sans their managers, Birla Sun Life Mutual Fund has lost the brains behind some of the great performing funds and even an opportunity to add management depth and breadth.
Of course, management team plays an important role but Birla funds have seen too many manager changes. For example, all the older equity funds of Birla Sun Life has seen at least three changes. The road ahead is full of challenges but it also gives an opportunity to the fund house to establish itself as a credible destination for long-term equity investments. The erstwhile Alliance fund investors should keep patience and see how the funds evolve in their new house.
This article was originally published on December 20, 2005.
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