Sundeep Sikka , CEO, Reliance Capital Asset Management Ltd. in an interview with ET Now talks about the growth prospects of the mutual fund industry going forward.
Let's start with the buzz on the street that Reliance Mutual Fund is looking at selling 26% stake to a foreign AMC...
Within the top 10 AMCs, we are the only one, which does not have a foreign partner and this question keeps coming back again and again. Let me clarify, we are not looking at any stake sale at this point of time, however, at the same time, we are talking to some players for distribution and product partnership globally.
Are you open to a stake sale? Could it be a possibility in next six months, 12 months or you would like to dismiss that also totally?
We will come back to you as and when that happens. Today if you look at the Indian mutual fund industry, the outlook is so positive, we want to build up the company. Like I mentioned, yes, after building up what we have done in India with the global opportunity that we see, we are looking at product and distribution partnerships across the world.
At some point in time, I am sure the promoters would like to monetise the value of the AMC, so what is stopping you from selling the stake in an AMC, it is a good time to monetise?
In India, we are the largest asset manager having about a network of 300 locations. We are present in 300 locations having 40000 distributors. We have built up a great franchise and I do not think so there is a need for us to monetise this business at this point of time.
However what is more important is if you look at the overall mutual fund industry in India, at this point of time 2% of the population is investing in mutual funds. Today if 2% of the population is investing in mutual funds, as we go forward, there is a big opportunity in India, and we believe we at this point of time are in a very good position to capitalise on this opportunity with the network, the brand and the track record that we have.
What about the market though? Is all the negative priced in in terms of inflation, the political risk and high commodity prices as well?
From the mutual fund industry point of view, we have been having a lot of concerns in short term, but from a long-term point of view, mutual fund industry and the mutual fund industry investors have really made very good returns.
If you see from a 15-year perspective, average mutual fund, the top 5-10 mutual fund schemes have given a return of 25% CAGR. Yes, there will be the short-term worries and these have always been all this while for the last 15 years. Yes, we clearly believe market seem to be fairly valued, neither is it expensive nor is it cheap but we will not be able to comment on how markets behave in the next 2-3 quarters but from a 3-5 year perspective, we believe investors will walk away with a 15-20% return.
2010 was a very tough year for mutual fund industry, mutual funds were experiencing more outflows and higher amount of redemption. Do you think the trend could change this year?
Yes. If you were to look at the numbers, last year as an industry, we were down about 5%. We started the industry at about 747.44 crores, we closed the industry at about 7 lakh crores. It is very important to understand that we have to break down this industry in two parts, one is the institutional, which is more on the debt side.
In the month of March, we saw more than a lakh of crores going out but this was again more to do with institutional bank money, which is more a function of the liquidity in the system. We have already seen that money come back in the industry in the first 2-3 weeks of April. However when I go back to the equities side, yes, in the equities side also, we were down about 13000 crores and we lost about 18 lakh investors in the last 12 months.
If you were to see this data, the numbers on a standalone basis is not a very encouraging thing. If you were to look at the overall trend, then I will just share with you some interesting trends, which are emerging. One of the most important things in the mutual fund industry is that we started the year with about 35-40 lakh SIPs, today we are ending the year with 65 lakh SIPs across the industry. Every month we are seeing an inflow of 1500 crores coming in through SIPs. For us at Reliance, we were doing about 50000 SIPs a month.
Today we are doing more than 1.25 lakh SIPs. There is another trend on the retail side. We clearly saw retail debt emerging as a very important thing. MIP as an industry today is nearly about 25000-30000 crores.
For us our MIP scheme, which was less than 200 crores just 18 months back is nearly about 8000 crores now. So on one side, we saw SIPs emerging as a very important tool of investments on the other we saw retail debt coming in. We launched a scheme in gold, and we were ourselves surprised to see the results. The way the investors grabbed this. In a 15-day NFO, we saw 2 lakh investors.
What's very interesting is just 45 days after the NFO, we have added 1 lakh investors more, so it is very important, the new trends, which are emerging. In the last 18 months, we have seen 85% of the inflows coming in the open-ended schemes, so I clearly believe industry has been adopting to these changes, the regulatory changes, whatever changes we saw in the 18 months.
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Source : ET
Let's start with the buzz on the street that Reliance Mutual Fund is looking at selling 26% stake to a foreign AMC...
Within the top 10 AMCs, we are the only one, which does not have a foreign partner and this question keeps coming back again and again. Let me clarify, we are not looking at any stake sale at this point of time, however, at the same time, we are talking to some players for distribution and product partnership globally.
Are you open to a stake sale? Could it be a possibility in next six months, 12 months or you would like to dismiss that also totally?
We will come back to you as and when that happens. Today if you look at the Indian mutual fund industry, the outlook is so positive, we want to build up the company. Like I mentioned, yes, after building up what we have done in India with the global opportunity that we see, we are looking at product and distribution partnerships across the world.
At some point in time, I am sure the promoters would like to monetise the value of the AMC, so what is stopping you from selling the stake in an AMC, it is a good time to monetise?
In India, we are the largest asset manager having about a network of 300 locations. We are present in 300 locations having 40000 distributors. We have built up a great franchise and I do not think so there is a need for us to monetise this business at this point of time.
However what is more important is if you look at the overall mutual fund industry in India, at this point of time 2% of the population is investing in mutual funds. Today if 2% of the population is investing in mutual funds, as we go forward, there is a big opportunity in India, and we believe we at this point of time are in a very good position to capitalise on this opportunity with the network, the brand and the track record that we have.
What about the market though? Is all the negative priced in in terms of inflation, the political risk and high commodity prices as well?
From the mutual fund industry point of view, we have been having a lot of concerns in short term, but from a long-term point of view, mutual fund industry and the mutual fund industry investors have really made very good returns.
If you see from a 15-year perspective, average mutual fund, the top 5-10 mutual fund schemes have given a return of 25% CAGR. Yes, there will be the short-term worries and these have always been all this while for the last 15 years. Yes, we clearly believe market seem to be fairly valued, neither is it expensive nor is it cheap but we will not be able to comment on how markets behave in the next 2-3 quarters but from a 3-5 year perspective, we believe investors will walk away with a 15-20% return.
2010 was a very tough year for mutual fund industry, mutual funds were experiencing more outflows and higher amount of redemption. Do you think the trend could change this year?
Yes. If you were to look at the numbers, last year as an industry, we were down about 5%. We started the industry at about 747.44 crores, we closed the industry at about 7 lakh crores. It is very important to understand that we have to break down this industry in two parts, one is the institutional, which is more on the debt side.
In the month of March, we saw more than a lakh of crores going out but this was again more to do with institutional bank money, which is more a function of the liquidity in the system. We have already seen that money come back in the industry in the first 2-3 weeks of April. However when I go back to the equities side, yes, in the equities side also, we were down about 13000 crores and we lost about 18 lakh investors in the last 12 months.
If you were to see this data, the numbers on a standalone basis is not a very encouraging thing. If you were to look at the overall trend, then I will just share with you some interesting trends, which are emerging. One of the most important things in the mutual fund industry is that we started the year with about 35-40 lakh SIPs, today we are ending the year with 65 lakh SIPs across the industry. Every month we are seeing an inflow of 1500 crores coming in through SIPs. For us at Reliance, we were doing about 50000 SIPs a month.
Today we are doing more than 1.25 lakh SIPs. There is another trend on the retail side. We clearly saw retail debt emerging as a very important thing. MIP as an industry today is nearly about 25000-30000 crores.
For us our MIP scheme, which was less than 200 crores just 18 months back is nearly about 8000 crores now. So on one side, we saw SIPs emerging as a very important tool of investments on the other we saw retail debt coming in. We launched a scheme in gold, and we were ourselves surprised to see the results. The way the investors grabbed this. In a 15-day NFO, we saw 2 lakh investors.
What's very interesting is just 45 days after the NFO, we have added 1 lakh investors more, so it is very important, the new trends, which are emerging. In the last 18 months, we have seen 85% of the inflows coming in the open-ended schemes, so I clearly believe industry has been adopting to these changes, the regulatory changes, whatever changes we saw in the 18 months.
~
Source : ET
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