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Faced with declining business from large companies and banks, fund houses are turning to the Small and Medium Enterprises sector (SME). According to Jaideep Bhattacharya, Managing Director of Baroda Pioneer AMC, SMEs as a category of investors in debt markets is a big opportunity that fund houses can tap into.
There is a lag between the earning and expenditure cycles of SMEs during which they can invest their funds. That is why short term debt fund products like ultra short term funds or income funds are best suited for them.
“SMEs lack the awareness about investment and hence require hand holding. We are working with agencies who track the sector to understand their business cycles better and structure products specifically for them,’’ Bhattacharya said.
The fund house also plans to leverage the network of Bank of Baroda, one of its parent companies to target SME customers.
“SMEs have strong relationships with their banks because they don’t have the time or wherewithal to deal with multiple banks. So, we will use the relationship of BoB to reach out to such customers,” he said. Currently, the fund house sells its products in half of BoB’s 4,000 odd strong network.
When it comes to managing customers’ funds, a fund house will have to spend more time with an SME customer than a large corporate customer. But the stability of such portfolios will be higher and the duration of the funds invested too will be longer, Bhattacharya added.
