Thematic funds will fare better in 3-4 years

The next 2-3 years would be solid for equity markets in general and the mutual fund industry in particular, Harsha Viji, MD, Sundaram Mutual Fund, would have us believe.
In an interview with Nitin Shrivastava and Aswathy Varughese, this qualified chartered accountant talks of the transition of the fund house from being a mid-cap equity specialist to a balanced and yet profitability oriented fund house over the past few years.

Going forward, the fund house plans to grow its assets under management to Rs40,000 crore in 2-3 years. Edited excerpts:

What has been your asset management company’s strength till now?
We are among the few mutual funds that have consistently made money year on year for the last 5 years, and return on equity to shareholders has been good. We have never bought or chased topline and have been just outside top 10 in terms of overall assets. But we have been a very strong player in equity funds and are well into top 10 in equity league table – with equity AUM close to Rs7,000 crore.

Even on the debt side, where we have an excellent fund management team, our focus has been to grow profitably. We are one of the most retail-centric fund houses with investor folios of close to 2 million last year and that has been our strength at group level (i.e. Sundaram Finance) as well. So, even as we are trying to get more institutional money, retail investors would continue to remain at the centre of gravity for us.

What have you done to grow your assets in recent years?
From debt fund perspective, till around 2-3 years back, our total debt AUM was very small at around Rs2,500 crore and that was the time our equity side with mid-cap, small-cap and sectoral funds for which we were known for, was going through a very rough time. That was when we decided that we need to be an all-round AMC rather than being a mid-cap specialist and equity focussed player.

So, apart from building assets on debt and liquid fund side – which are now close to Rs6,500 crore – we also widened our equity offering from thematic funds to equity diversified funds. On distribution side, too, we have grown from being an IFA- (independent financial advisers) centric player to developing channels like banks and other national distributors to cater to high net worth individuals (HNIs). So, we have rounded our offerings and have become more balanced.

Within equity, which funds are the ones seeing huge interest?
The funds that are doing well for us are mid-caps and other bigger funds including Smile and Tax Saver. Though many of our thematic funds in energy and infra sector have witnessed a large fall, given the way things are looking up for energy and power sector in India, we expect them to fare better over the next 3-4 years.

What kind of growth plans are you setting for your AMC in coming years?
Our goal is to take our overall AUM to the level of Rs40,000 crore in 2-3 years. The basic aim is to continue being seen as a material AMC. We want to keep the proportion 50:50 in equity and debt. In order to achieve the same, we believe we have a distribution platform in place and also, we are concentrating on the technology platform.