‘Fund manager skills are more important than AMC processes’

Killol Ringwala of Safe Assets talks about his journey in advisory, his fund selection methodology and more.
By Morningstar |  23-11-18 | 

Grown up in Ahmedabad, Killol Ringwala completed his Masters in Business Administration from S K Patel Institute Of Management specializing in marketing.

Killol always aspired to be an entrepreneur. The promoters of his two-decade old real estate family business called Space Management wanted to diversify by entering the financial advisory business. They were looking for someone to head this vertical. When Killol was presented with this opportunity, he lapped it up. This was the birth of Safe Assets in June 1999.

A large chunk of its initial client base were existing clients from the real estate business. But convincing people to invest in mutual funds was not easy. Killol recalls that his clients had not even heard of mutual funds. “Private sector fund houses were entering the industry. The prospects I met had no idea about mutual funds. It was tough to convince them to invest in an intangible asset class like mutual fund. We started on a very basic level about educating clients about what are mutual funds, how they are managed, where do they invest and so on. We used to have joint calls with fund managers to convince clients about the virtues of investing in mutual funds. After the tech bubble, clients realized the dangers of investing on their own and started giving money to professionally managed funds,” recollects Killol.  While the start was slow, his clients realized the benefits of diversifying into mutual funds and referrals started streaming in.

Formed in 2000 when the mutual fund industry was still in its infancy, the firm today manages assets under advisory of Rs 600 crore with a five-member team. Most of his clients are high net worth individuals.

Direct plans

As direct plans started becoming popular, his clients started enquiring about the benefits of migrating to this share class. “I was transparent and explained the pros and cons of direct plans. I told them they are cheaper by 60-80 basis point. I explained that they will still need my guidance to monitor the portfolio. I said I can help them move to direct and will charge 40-50 basis advisory fee annually on the size of the portfolio. They preferred with the existing model and continued with regular plans,” says Killol.

Fund selection

Killol prefers to allocate client monies to select fund managers with proven track record. Thus, he works with only five asset management firms. He adopts a bottom up approach while selecting funds for his clients. This means he gives utmost importance to the pedigree of the fund manager more than anything else.

“I have been recommending funds managed by Prashant Jain since the time of Zurich. I have seen that he stands by his conviction and doesn’t not churn portfolio very often,” says Killol.

S Naren, Kenneth Andrade, K. N. Sivasubramanian and Anand Radhakrishnan are some of the other fund managers whom Killol looks up to. When Kenneth moved out of IDFC Mutual Fund to set up Old Bridge Capital, Killol started allocating money to his PMS.

While Killol prefers to give money to fund managers who come with long track records, he does not shy away from exploring new managers/emerging fund house offering innovative products. He is currently exploring the schemes of Motilal Oswal AMC, PPFAS AMC and Mirae Asset. Killol receives a lot of request from relationship managers to recommend their schemes but he sticks to his working style.

Among the key parameters/qualities he looks for is the ability of a fund manager to protect the downside, conviction to hold on to ideas in bad times, investment style, and work history with the fund house. More importantly, he likes managers who do not launch too many funds by succumbing to the marketing team’s pressure.

The fund industry has seen a high degree of churn lately. To discourage star fund manager culture, fund houses have been promoting their institutional style of fund management and investment management processes. But Killol is not convinced. He believes that the human element cannot be taken away from fund management. “Every fund house tracks a universe of 100-200 stocks and the processes are more or less same everywhere. Ultimately, the fund managers decide which stock he wants to buy/sell and the weightage for each stock based on his foresight, experience and conviction,” explains Killol. To stay abreast, he meets regularly meets fund managers to understand their thought process.

Killol has not recommended direct equity to his clients yet.

Belief in equities

Killol is a firm believer in the wealth creation power of equities, which is evident by his client’s allocation towards equities. Of Rs 600 crore AUA, 65% assets are in equity. His clients are mainly looking for growing their surplus wealth through mutual funds and do not have any specific goals attached to their investments.

Due to the volatility in markets, Killol is actively recommending his clients asset allocation funds which shift assets based on parameters like price to earnings, price to book and other key market indicators. After recategorization, his recommendation is restricted to three categories – multi-cap, focused funds, and small cap funds.

Killol spends a lot of time in research. He has been actively using Morningstar Advisor Workstation since the last nine months to strengthen his research capabilities. “I upload clients existing portfolio to analyze the extent of stock overlaps in each portfolio. If the overlap is high, I prune the portfolio and recommend new funds which fill the void. With AWS, I’m able to tell clients why I’m recommending a particular fund,” says Killol.

The road ahead

Killol has started using Mutual Fund Utility since the last three years which has helped him onboard clients faster. With the reduction in earnings due to the recent changes in the industry, he plans to enter the mass affluent segment to grow his business. “Post entry load ban, servicing retail client became unviable. With the advancement in technology, it is far easier to cater to tech savvy retail clients and build scale,” says Killol.

That said, Killol is also exploring to expand his company’s reach by setting up branch offices in other metros like Bengaluru, Delhi and Mumbai.

This post is authored by Ravi Samalad.

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mmc ttr
Dec 10 2018 09:47 PM
mmc ttr
Dec 10 2018 09:46 PM
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