BS Fund Cafe 2017: MF sector has added muscle, not just fat, says C B Bhave

Lauds quality of growth and geographical penetration shown by industry in the past three years

C B Bhave, former chairman of the Securities and Exchange Board of India (Sebi) and chief guest at Business Standard Fund Café 2017, applauded the quality of growth and geographical penetration shown by the mutual fund (MF) industry in the past three years.

“Growth without fundamental principles is like fat. Growth with good base and fundamentals is like muscles. I am glad that the MF industry has muscle and not just fat,” said the former Indian Administrative Service (IAS) officer, highlighting sharp growth in assets shown by the domestic asset-management industry.

The assets under management (AUM) of the industry has doubled in the past three years to Rs 20 lakh crore and the growth from beyond the top 15 centres (b15) has outpaced the industry growth rate.

“I’ve come into a room where I see smiling faces. Normally, the environment used to be a bit tense whenever I got into the room. It’s a nice break from that,” Bhave, famous for abolition of entry loads, said in his opening remark at the Business Standard Fund Café 2017, which was attended by heads and top money managers at asset management companies (AMCs).

The enthusiasm and excitement among industry players was palpable given the consistent growth in assets and investor flows over the last few years. The recent growth has not just helped the industry reverse the long slide it went into after the 2008 global financial crisis but ensured it scaled new highs.
 

“During the financial crisis the MF industry was in real trouble. There were lots of tense moments. But then we learnt how the regulator and industry can work together to come out of the woods,” said Bhave, who had taken charge at Sebi some months before the crisis broke.

Bhave applauded the industry’s efforts to address the investors beyond the country top cities but said there was a long distance to cover yet.
 

“India is vast; it is not just the cities and towns. We need to reach this India; the challenge is to manage cost and yet be able to reach them. I think technology should help tremendously,” he said evoking similar emotion as he did during his Sebi days between February 2008 and February 2010. During this leadership, the market regulator took several crucial measures impacting the MFs, most of them were aimed helping the end investor.

“The issue at heart was the people selling MF schemes, whose agents were they? Were they agents of investors or of AMCs? I am very happy to see that the industry has come a long way from the debate. We have virtually separated commissions from advisory fees. We still have some distance to go,” he said.

Bhave urged fund managers to thread with caution at a time when there is too much exuberance in the market. 

“It is not easy to see failure during good times. Good times also invite managers to take excessive risk. You need to be careful about this,” he said.

Bhave acknowledged the industry for performing their duty as a shareholder by actively voting at resolutions proposed by listed companies. He also said the growth in investor accounts was encouraging but pondered how many unique individual investors were behind these 55 million folios.

He asked the industry to work with the regulator and reduce the number of me-too schemes as it will make it simplify investing. Bhave asked the industry to take up an active leadership role and not just follow regulatory diktats. He illustrated this by saying the industry should go to Sebi and ask for the data on cancelled permanent account numbers (PANs) and see if any of them were present in your database of investors.

“The difficulty with taking leadership is in the short-run it is harmful to you, because you may as an industry be seen as too proactive to eliminate the people who are bringing money to you. But that’s the right attitude you need to grow with good money,” he concluded. 

C B Bhave (centre), former Sebi chairman and chief guest at the Business Standard Fund Café, with DSP BlackRock’s Vinit Sambre (left), and UTI Mutual Fund’s Ritesh Nambiar—Business Standard Fund Managers of the Year, equity and debt, respectively

GROWTH WITH CONSOLIDATION: (L to R) HDFC MF MD Milind Barve, ICICI Prudential MF MD & CEO Nimesh Shah, Reliance MF ED and CEO Sundeep Sikka, SBI MF MD & CEO Anuradha Rao, Edelweiss MF CEO Radhika Gupta, Kotak MF MD Nilesh Shah, UTI MF MD Leo Puri, Birla Sun Life MF CEO A Balasubramanian at the event in Mumbai on Friday 

EQUITIES AND DEBT - A REALITY CHECK OF TRENDS: (L to R) UTI MF Group President and Head of Equity Vetri Subramaniam, Birla Sun Life MF Co-CIO Mahesh Patil, Reliance Capital Global Head of Equities Sunil Singhania, HDFC MF ED & CIO Prashant Jain, and ICICI Prudential MF ED & CIO S Naren at the event in Mumbai on Friday.  Photos: Kamlesh Pednekar