When HSBC AMC launched in 2002, it got off to a sizzling start. The traction of the HSBC brand coupled with the outstanding performance of its flagship scheme put the AMC on the investment map.
That has changed. Now, HSBC Mutual Fund has some serious issues to contend with. The AMC has witnessed a dramatic fall in assets under management over the past years and the performances of its schemes leave much to be desired.
Earlier this year, Ravi Menon took over as the Chief Executive Officer of HSBC Global Asset Management India. He shares his thoughts.
What plans do you have in mind to increase the asset under management?
We are a major global asset management firm managing assets totaling approx. $450 billion - end June 2016. We are well placed to provide a globally-consistent, disciplined, investment process across these capabilities, which draws on the local knowledge and expertise of our team of over 500 investment professionals and approximately 2,000 employees based in nearly 26 locations around the world. So we are a global leader who has successfully provided local solutions whilst drawing on this hugely experienced talent pool and expertise.
In India whilst we have always focused on the retail segment we plan to aggressively grow our institutional business. Retail third party distribution today is a significant contributor and we do plan to build it further with a focused set of distributors who, like us believe in a ‘Investor First' philosophy. In the final analysis we would prefer to be relevant to be client focused rather than chase AUM for AUM sake.
With your background in strategy and planning, what strategy do you have in mind to take the AMC forward?
Consistent with the HSBC Group's vision to be the leading international bank, our vision is to be the leading asset manager for our clients. Our vision makes a clear, long-term commitment to focusing on understanding and meeting the needs of the personal, commercial, corporate and institutional clients. Achieving our vision will require us to be dependable (consistently high performance) and to do the right thing (fiduciary about our clients - they always come first), to be open to new ideas and to be connected, as a single Global Asset Management team, with our clients and colleagues across the HSBC Group.
Above all, we will continue to act with courageous integrity by making decisions in the interests of our clients and other stakeholders, without compromising the ethical standards and integrity on which the company was built.
At the current moment the underlying economy is poised for growth, inflation is trending down, interest rates will follow and as investors seek returns there will be a natural bias towards mutual fund products. The key will be to provide a differentiated offering, not just in terms of product but also in terms of service to our clients. For us there are large segments which we are yet to tap and which we intend to do so very aggressively.
What would you say is the biggest challenge facing you as CEO?
A recent PwC report neatly captured this question by stating that the challenges across financial services have remained largely secular namely - governance, navigating regulatory complexity, delivering cost-effective technology and operations, trust and transparency, pursing growth, and leveraging human capital.
The Indian asset management industry is still at a nascent stage and it offers a huge opportunity for everyone to flourish, provided manufacturers are extremely clear about their business model. The industry base is still very narrow and a big challenge will be to improve investor awareness. There is indeed a compelling case for investors to invest in equities and debt through mutual funds which has volatility that is half of direct investing into markets and returns that are double of fixed deposits.
What will it take to make the retail section profitable?
We look at overall profitability and we have been consistently profitable since inception (with the exception of a brief period a few years ago). Over 70% of our AuM is from the retail segment and we enjoy the long term trust of clients who believe in the HSBC brand and our investment process.
In 2008, the AMC stopped the institutional business for a while due to the liquidity crisis. Late 2012 onwards, the AMC began to move aggressively into the institutional space. How is that panning out?
It would be incorrect to say that we stopped the institutional business. What we did do was to align some of our product philosophy to reflect the learnings of the past global financial crises era. We did so to safeguard our investors’ interest. On the institutional side this meant that our returns particularly in the cash fund was reflective of this philosophy. We still continue to stand by that philosophy as we believe that it is the right thing to do and we will never comprise on something which can affect investors’ interest, irrespective of rankings.