As MFs gear up to launch SIFs, distribution takes the centre stage

Fund houses initiate discussions, roll out training programs for distributors

With the specialised investment fund (SIF) licence in their bags, and scheme approvals in sight, the first set of entrants in the SIF space has started working on the distribution puzzle. 

Five fund houses — SBI, Edelweiss, Quant, Mirae, and ITI — say they have initiated discussions with key distribution verticals, including wealth management firms, banks, and national and individual MF distributors (MFDs). 

“We are proactively engaging with all key distribution segments, including banks, MFDs, and wealth managers. Among them, MFDs and wealth managers are well-positioned to drive SIF distribution. They already cater to a sizable base of high networth clients, and are well-equipped to understand and communicate the strategic nuances of SIFs, making them strong partners in this space,” said Radhika Gupta, managing director and chief executive officer (MD & CEO) at Edelweiss Asset Management. 

According to MF officials, SIF being a new and complex offering makes it crucial for them to focus on distributor communication. SIFs are an offshoot of MFs, designed for investors with higher income as well as risk appetite. 

These products, which require a minimum ~10 lakh investment, will offer long-short strategies, and can take concentrated bets.

“The initial phase of these discussions has been largely educational. Many distributors are currently pursuing their certifications, and at the same time, they’re looking to better understand the intricacies of this new asset class,” said Suranjana Borthakur, head of distribution & strategic alliances, Mirae Asset Investment Managers (India). 

Considering the product complexity, the Securities and Exchange Board of India (Sebi) has made the NISM Series XIII certification compulsory for distributors wanting to sell SIFs. 

NISM, which stands for National Institute of Securities Markets, is an educational initiative of Sebi. 

The exam is said to be a difficult one for distributors, given that it includes questions on equity as well as currency derivatives. Given the difficulty issue, fund houses have been holding online sessions or sponsoring classes by experts for distributors.

“We are conducting preparatory sessions for distributors to help them train for the NISM Series XIII exam. While these sessions are being held virtually, we are also organising physical meetings to discuss the operational, regulatory, and business opportunity aspects of SIF. This would ensure that everyone in the industry is well-prepared and aligned,” said Jatinder Pal Singh, CEO, ITI Mutual Fund. 

Mirae, Edelweiss, SBI, and Quant are also holding such sessions. Fund houses say that engaging with distributors is crucial to ensure investors, many of whom will be investing in such products for the first time, receive schemes suited to their risk profiles.

 “As the SIF category evolves, it will be important for distributors to go beyond certification, and build a strong understanding of the product structure, and its associated risks. SIFs may vary significantly across fund houses in terms of strategy and risk profile. As such, a single-benchmark comparison may not be adequate. Distributors will need to assess each offering on its own merits and suitability, keeping client risk profiles in mind,” said Borthakur.

Building distribution muscle

 

• Wealth managers, banks, national and individual distributors key to SIF sales as direct online investments may be slow initially 
• Considering product complexity, fund houses have started training distributors 
• Some players say their initial focus is on establishing distribution in top cities, given the concentration of wealthy investors