Foreign players in the Indian mutual fund (MF) industry haven’t been able to gain a strong foothold, as domestic companies have been dominating the space with over half the market share. Amid a competitive scenario and tough regulatory framework, Christopher Spelman, CEO of JPMorgan Asset Management (India), speaks to Chandan Kishore Kant and Jinsy Mathew about a road map to grow a profitable business. Edited excerpts:
Where does India stand amid the tumultuous world market?
India has significantly underperformed, compared with the rest of Asia, in the recent past, but many of the negatives have already been factored in. We believe markets here are closer to bottom, compared to the rest of Asia and other emerging markets. In the short term, we can see Indian markets taking cues from global markets. However, in a three-five year horizon, we expect India to outperform the rest of Asia.
What should a retail investor who mostly stays away from equities do?
Invest in MFs with a long-term perspective. When I say long term, I mean 5-10 years and not a one-year period. Over the longer term, the Indian equity has outperformed many other asset classes, such as gold, real estate and fixed deposits. A piece of advice I would like to give retail investors is to diversify. If an investor has a diversified portfolio at this point of time, his overall portfolio would not be performing as badly as you might expect.
Yours is a global brand. Have you been able to connect your brand with the Indian investor at a time when domestic MFs are doing better?
Institutionally, we are strong and have done well. Now, where we need to build up our brand is among independent financial advisors and national distribution channels. We are launching an internet tool which will help them do business better and give better advice to their clients. We need to try and spend money smartly and since we are in India for the long term, we want to grow our business sensibly and strategically. We are not in the race to be India’s top AMC. We just want to make sure our clients benefit by investing in our funds and that we have a profitable business.
Your business is heavily inclined towards institutional money in India, with a ratio of 80:20. How do you plan to cater to retail?
We definitely want to increase the assets we have on the retail side because these assets are for long term, retail penetration rates are low and will grow quickly, and this is an area in Asia where we have significant expertise and have seen success. To achieve this, we are looking to increase our distribution network, not just in metros but also in smaller cities. Initially, while it will be a challenge to compete with the top five players, who have a significant number of branches, we hope to substantially grow our business in the years to come.
Is inorganic growth on the radar?
We are not looking for acquisitions, but we will never rule out inorganic growth. If an opportunity presents itself, we would review it. But that’s not our top priority. There are a number of hurdles having a successful acquisition in India. Price is an issue. Moreover, the culture of the organisation is definitely an issue, which could make integration difficult.
Will the regulator’s nod to $10 billion investments in MFs from foreign retail investors help the industry?
We see that as a potentially significant opportunity for the industry. But at the same time, there are hurdles which need to be addressed to harness the opportunity. I would say it’s an opportunity, particularly for institutional and high net worth clients. On the retail side, the complexities involved will make it less of an opportunity, at least in the short term. At the moment, there are some uncertainties on a few issues, such as know your customer, PAN and taxation.