The new entrants in the domestic mutual fund industry are finding it difficult to survive. Industry observers say it will be tough for them, especially when players like Reliance, HDFC, ICICI, Birla and UTI are getting bigger. Rajiv Anand, managing director & CEO, Axis AMC — which was started only recently — says he is betting big on Axis Bank’s name and distribution network. He tells Chandan Kishore Kant that Axis AMC will be among the top 10 in the next five years.
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At a time when several asset management companies (AMCs) are finding it tough to survive, is it the right time to enter the market?
It is a business that we are building for the long term. For a long-term player, timing is relative. Given the low penetration of managed products, mutual funds in particular, the next three-six months may not seem the right time to start a business. But Axis Bank wants to be in this business as it is core to its offerings. As affluence rises and more people look at managed products, we will get our share of the market.
Being a newcomer, what challenges is your fund house expected to face?
There are three reasons that make a fund house successful — brand, distribution and performance. Axis Bank, which is a well-known name in financial services, brings us the brand as well as a distribution network. It is present in 550 cities with 850 branches. So, we are piggybacking on Axis Bank’s brand name. The brand’s reach puts us in competition with larger players. So, we are not considering ourselves as newcomers. The next and the most important thing is performance. From the distribution perspective, we are building teams that are much bigger than what a newcomer sets up.
What is your present headcount and where do you plan to take it?
Currently, we have 55 people. The number will be about 100 by the end of March. The entire team is from the mutual fund industry. We have five fund managers and are looking at a 10-member team. We have been able to attract talent from leading fund houses.
Any products you are looking to launch initially?
By March 31, 2010, we will have eight products. There will be two-three products on the equity side, two money market products and two-three fixed income products. We are also looking at the hybrid space. Our sales team will most probably be in 80 locations by the end of the current financial year.
Will you be dependent only on Axis Bank’s branches?
No. We are running an open architecture model. Unlike other newcomers, we come with captive distribution. And for banks, mutual funds are core to their offerings, which puts us on a higher level. Axis bank has access to over 10 million customers. It is our effort to enter as many distribution channels as possible. Our mandate is to have 60-70 per cent third-party distribution.
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Since more than 75 per cent of the industry’s assets under management (AUM) are controlled by top players, how will you grab the market share?
The process of marginalisation has started as money is moving to the top ten players. We have the advantage of our brand and so initial sales will be easy. Thereafter, we have to grab every inch of the market with innovative products and build a track record. That is when we will become more recognised. We aim to be among the top 10 players in the next five years. We need to battle the big boys.
Will you look for an inorganic growth?
Yes, we are open to inorganic growth. If any target player complements our capabilities, we will certainly look at buying, but at the right price.
Which themes would you like to play around with?
There are a couple of themes that we will like to play, namely local consumption and infrastructure. However, we will not look at sectoral funds in the near future.
How important is AUM for you?
It is a misconception that a profit-making player cannot be a big AUM player. One needs to chase both. So, do we want to be profitable with a small AUM? No. If you get size, you will get profits.