Sundaram Mutual Fund is planning to come out with more close-ended schemes. The objective is to make the retail investor stay with the fund for a longer period. In an interaction with The Hindu , Harsha Viji, Managing Director, Sundaram Mutual Fund, said the retail investor was virtually not there today. He, however, asserted that “our heart is in retail.’’ Out of Rs. 17,000 crore of assets under its management, the share of retail assets is worth Rs.10,000 crore.
Sundaram Mutual Fund has already come out with two fixed-term plans namely Sundaram “Fixed Term Plan - FC (369 days) and Sundaram Fixed Term Plan - FD (397 days). The objective is to generate income with minimum volatility by investing in debt and money market securities.
Fielding a range of questions, he said the mutual fund industry, in general, had to shell out more money in terms of commissions. Out of the 44 mutual fund houses, only 16-17 were making money. “We (Sundaram Mutual) are in the ninth position. We never made losses. We are in the business only to make profits,” he said.
In 2012-13, fund houses forked out Rs. 2,388.63 crore as commissions to distributors. The total profit of 44 the mutual funds put together, however, was only Rs. 830.53 crore. Only retail investors contributed to the profit of mutual fund houses. The retail penetration, however, was less than one per cent, he pointed out. Sundaram Mutual Fund, with its focus on retail investors, managed well the challenging situation faced by the industry, he said.
With more than 15 lakh folios and 40 lakh investors, the company would continue its focus on the retail segment, Mr. Viji said. On the performance in the current fiscal year, he said the company was able to beat the benchmark indices though there was a sharp decline in equity assets. It also managed to maintain its market share. With superior customer service, Sundaram Mutual was No. 6 in terms of number of investors. It was No. 15 in terms of size and No. 10 in terms of profits.
With the focus fixed firmly on growth, many industry players had gone largely away from retail and towards institutional investors. Last year, Rs. 1 lakh crore of assets were added into treasury funds. The profitability was close to zero, he said. “This only adds to the size of assets. You can say I have grown. If you are going to become a retail player, you have to build retail assets over time. But you need investment. The industry needs capital to increase penetration,’’ he said.
Viewed from this angle, he welcomed the recent move to prescribe a minimum capital of Rs. 50 crore for the AMCs and Rs. 50 lakh seed capital for each scheme floated by the fund houses. “The long-term source of profitability in the business is from retail investors,” he said. “If you are coming to India to make a quick buck, you can’t. It is a long-term story,’’ he pointed out. He said Sundaram Mutual was going in for branch expansion to increase retail penetration. “We are looking to increase the number of branches 4 to 5 times. But the first step is to add 100 branches outside the metro and sub-metro areas, and not at the village-levels,’’ he said.
