Aditya Birla Sun Life Mutual Fund won the Morningstar award for the Best Fund House: Overall. The other two nominees were Franklin Templeton Asset Management (India) and L&T Investment Management.
A Balasubramanian, Chief Executive Officer at Aditya Birla Sun Life Mutual Fund chats with Morningstar about the company’s vision.
Aditya Birla Sun Life AMC has won the Morningstar Best Fund House Award (overall) 2018. How do you strike the right balance in putting up a winning performance across both categories – equity and debt?
Thank you for the recognition of our investment performance in both the equity and debt category. In fact, both the teams work independent of each other, except for sharing their macro views on the economy and analyzing the broad emerging trends in the economy. There is a greater synergy formed by both the teams as they share their research inputs amongst analysts. This again brings the synergy benefit to money managers while construction of portfolio at the individual level.
Could you share the investment philosophy of the fund house and how has it evolved over the years?
Broadly the underlying investment process revolves around investing in companies that are fundamentally sound and run by ethical management practices. Over time, these principles have been strengthened by the internal management scorecard created for every Investee company both in the Equity and Fixed Income universe of securities. This exercise helps in taking a meaningful exposure to various securities in both fixed income and equity in order to have the right exposure to the right securities in the portfolio. Lastly, the investment discipline combined with the understanding and meticulous analysis of risk, acts as a key pillar in the day to day investment decisions taken by the investment team.
You are a fund manager at heart. Do you still guide your fund managers in taking investment calls?
While my heart still leans towards investment, over a period of time my prime focus has been on a larger strategic business building direction, including people management. Having said that, we have set up an Investment performance review mechanism at regular intervals with Portfolio Managers and Analysts. This is being driven by the respective Chief Investment Officer in both fixed income and equity. Many a time I do attend this review process to provide the necessary support to the team, on the science and macro trend perspective. Ultimately, one can only guide what is the best alternate to every decision that anyone can consider on a daily basis and revolve decisions around that in order to get consistency of performance.
What is your roadmap for the fund house for the next three years?
We as a Fund House have been building a solid foundation in delivering consistent investment performance. This will remain the core area of focus and at the heart of the Institution. While the thrust on Investment, our existing strategy of building customer base through building distribution channel as well as geographical expansion remain a key area. Few more areas such as providing best-in- class post sales service to both our partners and customers, providing high quality Investment awareness across the country and stepping up our engagement through digital platforms are primary areas of our concentration. I am sure holistic activities such as these, along with investment at the center of attention, will help us create a sustainable business model in the asset management industry.
Mutual funds are getting net inflows to the tune of Rs 6,000 crore every month through SIPs. Are you finding new investment opportunities to deploy this fresh inflow?
While the SIP flows continue and has begun gaining higher and higher acceptance from the investing public, the money manager’s job remains focused on finding winners in the market. Of course, this will be guided by the valuation, availability of stocks, future growth potential among other things. As the size keeps going up, there will be a need to look at best alternate ideas to one’s own conviction so as to attain necessary outperformance to the benchmark. My belief is that supply and demand is the function of the need for resources through debt and equity financing. A vibrant capital market as it exists today, would provide enough opportunity for companies to tap the capital market and thus provide opportunity for money managers to look at investment ideas at all points of time.
How have investors reacted to the re-introduction of long term capital gains tax in equities? Do you foresee a negative impact on the inflows in mutual funds going ahead?
Given the fact that equity as an asset class, over a longer term tend to deliver substantially higher return than the available alternate investment options such as Fixed Income, Real Estate or for that matter Gold, LTCG should not act as a deterrent to Investors at large. There is no doubt the alpha generated out of tax benefit is taken away. However, tax on profit should not worry investors as long as the traditional return potential of equity remains high.
Good companies run by good management with a business model, do provide enough return opportunity to Investors. Hence, we don’t see too much of negative impact on the mutual fund flows as we move forward. This is also substantially supported by the huge under penetration that still exist in our country on the Equity ownership.
