DNA Mumbai Anniversary: Meet personalities who created their niche in Indian mutual fund industry

As DNA bloomed over the last 13 years, there has been a revolution of sorts in the financial savings of Indian households. This paradigm change has been spearheaded by the Indian mutual fund industry, which has added assets worth Rs 400 crore every day between 2005 and 2018. The industry has gone from strength to strength, creating an investor base of over Rs 7 crore, managing nearly Rs 23 lakh crore, and delivering returns that have consistently beaten other asset-classes. 

The MF landscape is dotted with some personalities who have created their own niche. Vivek Reddy led the first private-sector mutual fund and talked about SIPs at a time when very few listened. A Balasubramanian drove Aditya Birla Sun Life Mutual Fund to great heights, underscored by his affable nature and sharp money-manager skills. As chairman of the markets regulator, Securities and Exchange Board of India (SEBI), C B Bhave gave the 'shock and awe' treatment to the fund industry when complacency was setting in. Ajit Dayal of Quantum Mutual Fund reimagined the industry by making the ordinary investor the centre-piece. Sundeep Sikka of Reliance Mutual Fund chose the 'retail way' for profitable growth. And, Prashant Jain of HDFC Mutual Fund, with his unflinching investing skills made investors richer than ever, navigating markets for more than two decades. 
Here, we briefly profile these outstanding MF personalities.

A Balasubramanian: The Team Player

The binding force that has held the Indian mutual fund industry during challenging times 

The Indian mutual fund industry and its crores of investors must know and thank Melattur village in Thanjavur district, Tamil Nadu, the home of Aditya Birla Sun Life AMC’s CEO A. Balasubramanian. ‘Bala’ has been the binding force that has held the mutual fund and also the Indian MF industry during challenging times. His AMC, which boasts of a 6.4 million customer base, has been carefully built brick by brick by Balasubramanian.

As the seventh employee of the fund-house, he has seen the ups and downs. Bala started as a bond trader, became a portfolio manager looking after debt and equities, then managed sales, assumed chief investment officer duty and in 2009 was chosen as the CEO of the fund-house he had joined in 1994. Be it the industry’s challenges or his own organization’s tough times, Bala always batted on the front foot. But when you point out his achievements, his responses begin with the line: “Due credit should go to the team”.

Be it managing investors’ expectations during the tech bubble, streamlining Aditya Birla Sun Life MF after then CIO Bharat Shah quit in 2002, or the ‘Mutual Fund Sahi Hai’ campaign that caught India’s imagination, Bala was solid in terms of strategy and execution. In 2008, he managed investments, liaisoned with regulators both at SEBI and RBI giving key inputs that helped industry’s debt funds tackle the crisis. In 2012, Bala was part of the MF advisory council whose inputs along with the committee members’, led to reforms.

“Mindshare is more important than market share. I also ensured that people don’t work in fear, thereby earning their trust,” Balasubramanian told DNA Money. 

Even without a bank channel of his own, he has managed to catapult this AMC to a Rs 2.5 lakh crore player (third in equity assets and first in debt assets).

Prashant Jain: The Marathon Man 

He has been out-performing markets with almost a machine-like precision over long periods of time

When HDFC Mutual Fund acquired Zurich AMC (India) in 2003, they acquired the best fund manager in the country: Prashant Jain. Investment returns are when the rubber hits the road for mutual funds. For decades, Prashant’s funds have topped the charts and he holds the record for managing a single mutual fund scheme (HDFC Prudence) for the longest duration at a stretch (over two decades). Prashant has managed to out-perform markets with almost a machine-like precision over long periods of time.

As the Chief Investment Officer of HDFC MF, he has taken thoughtful risks and stuck to his guns. The Rs 20,000 crore HDFC Equity Fund has grown by over 22% every year since 1995, turning every four rupees into a hundred-note! No, wonder Prashant is the most well-paid fund manager taking Rs 24 crore, including an annual salary of over Rs 6 crore, in 2017-18.

“His continuity with the fund house has certainly helped the investment team and the funds managed by him. Prashant understands his stocks well and comes across as a manager who will stand by his convictions, yet not be stubborn,” says Morningstar. Like an expert marathon runner, he is fine with enduring short-term pain for long-term gains, which brings in an element of predictability to his investment style. “Prashant is the gold standard. He remains the main reason why HDFC’s live accounts (7.6 million) have consistently grown, as investors were drawn to him. If it were not for Prashant, could HDFC MF be the most profitable AMC?” quips a rival CIO.  

Vivek Reddy: The Maverick 

He is credited with floating the SIP concept in Indian mutual funds, which has now taken off

It is no secret that private sector MF companies have driven the 48 times growth in industry’s assets from Rs 47,000 crore in 1993 to Rs 22.86 lakh crore today in 2018. This journey started 25 years ago because of Vivek Reddy who as CEO of Kothari Pioneer, the first private sector MF, had the vision of making mutual funds a household product. Today, mutual funds, thanks to private sector MF firms, are 21% of bank deposits, showing that Indians have finally started moving towards funds and junking their obsession with gold and FDs. Reddy was the first employee of any private sector-sector fund house.

Drawing inspiration from the US mutual fund industry, a young and fresh Reddy started his work as CEO in August 1992 when he wasn’t even 30. He is credited with floating the concept of Systematic Investment Planning (SIP) in Indian mutual funds. A hard-sell 20-25 years ago, the SIPs today have just taken off and the MF industry today collects Rs 7,500 crore a month from SIPs alone.

“Some investors of those times are so happy. Everything they invested back then has now grown to 50-100 times size. SIP was the only way people could invest because there wasn’t so much cash lying around,” Reddy told DNA Money. Reddy was in the industry for 10 years (Franklin Templeton India bought the fund-house in 2002), and was a man ahead of his times.

“Vivek had the vision to launch open-ended funds. He hired the right people like Anoop Bhaskar, Sivasubramanian KN, Sukumar Rajah and Ravi Mehrotra,” recounts Rajan Krishnan, who was VP-sales at Kothari Pioneer. Reddy is not a conventional guy by any yardstick, given that he was just 40 when he left the industry. 

Sundeep Sikka: The Retail King

He foresaw the effects of regulatory changes and the shift in investors’ savings pattern

In 2009, at the age of 36, Sundeep became the CEO of Reliance Mutual Fund. In doing so, he was the youngest ever CEO of any mutual fund in over a decade. Ever since he joined Reliance in 2003, Sundeep’s constant drive has been for sticker retail assets, a marked difference in an MF industry that prioritized institutional money. As of May 2018, Reliance MF has the largest retail share (equity + debt) in the industry with Rs 77446 crore, ahead of the two biggest fund-houses (HDFC - Rs 76120 crore) and ICICI Prudential (Rs 56791 crore). Sundeep way back in 2012 correctly predicted that the Indian MF industry would touch Rs 20 lakh crore size before 2020. He foresaw the effects of regulatory changes and the shift in investors’ savings pattern.

In 2013, Sundeep became the chairman of industry body AMFI, the youngest AMFI chairperson. Under his stewardship as chairman of the financial literacy committee of AMFI, the committee initiated the practice of keeping aside 2 basis points TER for investor awareness as part of the exercise to widen investor base.

“Sundeep is a great leader and very different from others. He doesn’t have that usual boss air about him. And, he is not afraid to do things himself,” points out Dhirendra Kumar, CEO, Value Research. In 2012, Nippon Life came into RMF as a strategic partner picking up 26% stake – it was the largest FDI in the Indian MF industry. His constant endeavour to launch innovative products and customer service initiatives have paid off big. During his tenure, Reliance MF’s AUM has jumped from Rs 70,000 crore in 2009 to over Rs 2.4 lakh crores as of June 2018. Sundeep also shepherded RMF to become the first mutual fund to list on the Indian bourses in 2017, raising over Rs 1500 crore. 

C B Bhave: The Disruptor

He took it upon himself to initiate course-correction in the Indian mutual fund industry 

Chandrasekhar Bhaskar Bhave is a man who evoked extreme emotions on both sides of the Indian MF industry. The changes he ushered in during his 3-year SEBI stint, starting February 2008, made it difficult for anybody to ignore him. He took it upon himself to initiate course-correction in the Indian mutual fund industry and gave out bitter medicine. Coming down heavily on the MF industry’s focus on short-term gains for poor returns to investors, under Bhave in August 2008, SEBI abolished entry loads or fees charged to investors upfront for any investment in MFs.

This completely changed the way the industry operated. Bhave felt that most MF products at that time were not real financial innovation. Instead, they were a result of skewed short-term incentives to both distributors and fund managers. That is why he attempted to address these anomalies via the entry load ban. Industry executives accept that the ban had a big impact.

“Yes, it has...Some of the distributors were misusing entry load and were churning investors portfolio thereby enriching themselves at the expenses of investors,” says Vijai Mantri, a rank-holding chartered accountant, former CEO of Deutsche Mutual Fund, and Pramerica Mutual Fund. Besides, Bhave also sowed the seeds of the Indian MF industry reducing its 3000 odd schemes. He seemed to believe that the inability of so many schemes to match needs was responsible for investors moving away. Last year, SEBI took the massive recategorization and rationalization exercise, which has simplified mutual funds to a great extent and forced fund-houses to have one open-ended MF scheme per category. 

Ajit Dayal: The Rebel 

He created the first AMC to work against a distribution system and focus on simple products

Quantum Mutual Fund is India’s first dedicated, direct-to-investor mutual fund. As the then 29th fund-house, Quantum since its launch in 2006 has been shaped by the relentless attempt to be an ‘unmutual-fund’. That is courtesy Ajit Dayal, its founder. Undeterred by its size, Dayal’s Quantum has always been a contrarian. He created the first AMC to work against a distribution system, as some say, was loaded against the investors, and the first to focus on simple products. His Rs 1200-crore AMC has successfully rewritten the rules of the game.

With surprising regularity, what Quantum did today, market regulator SEBI and the industry did tomorrow. Quantum launched direct plans in 2006 and SEBI made it mandatory for fund houses to have direct plans in 2013. Dayal made Quantum the only fund house to not charge entry loads for all its funds for investors; this became a SEBI rule in 2009. Quantum was also the first fund house to credit exit loads back into the scheme; SEBI made this mandatory in 2012.

“Mr. Dayal started reimagining a mutual fund with investors at the centre of it all. The very idea of challenging a set idea is fun. He was a true people’s champion,” says Quantum MF MD & CEO Jimmy Patel. Dayal’s approach struck a chord with investors and his personality was like a magnet.

“He always came off as the angry young man of fund industry. Taking large fund-houses head on, criticizing industry practices and even attacked SEBI if the occasion called for it,” says a former SEBI official.