Public sector lender Canara Bank and Robeco, the asset management company owned by Rabobank, joined hands to form a 51:49 joint venture and entered the mutual fund market around 18 months ago. The company had average assets under management of Rs 4,744 crore at the end of the financial year 2008-09. In an interview with Niladri Bhattacharya & Sidhartha, Robeco Chief Executive Officer George Möller speaks about his impression of the Indian market and his company’s strategy going forward.
How has it been in India, considering that it is not the best time to be in the market?
This is a discussion I always have. If you have a difficult first year, you can test your system. You have to work harder, and make your system stronger. But if the first year would have been a bull year, then the question would have been whether you have done your homework first and then concentrate on growth, and later come to the conclusion that the foundations would have been better.
I am very philosophical about it. I feel that, as long as you use your time right, there should not be any issues. But we are growing at the moment, which is good news if you look at the asset management companies operating in India. And I think that we are one of the few who are growing at the moment.
So the primary target is achieved, though we are growing in other segments more, like fixed income group rather than equities, and this is the same for the other Asian markets as well.
What are your expectations from India? Give us some numbers in terms profitability, business and how that has been affected?
Of course, we still have to achieve profitability. But then, if you invest and make money easily, you expect to spend it as well. I am not so worried that we are not making money. But I am more concerned that, having put in the cost, we should be in the right position to create a future.
This means you have to have a better back office, better staff. But it does not mean making money by cutting back on staff, as then you also cut your future away. We are, of course, cost-conscious, but we are investing in the future.
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How has the whole market situation affected your plan?
Well, growth-wise at least, we are on track. Although it has grown through money market, whereas we expected more on the equity side. So, talking about growth, we would then have loved to have one or two successful equity launches.
That has not happened yet. But then 2008 was perhaps the most difficult year for fund managers since 1930. So we cannot expect to achieve all our targets.
There were some reports that Canara and Robeco would be diluting their stakes further. So are you looking at that possibility, or would you want to hold 49 per cent?
When we started, we had all kinds of discussions regarding how you should go ahead in the future. But, until now, we have not decided on anything. I think we need to first have a history behind us to feel comfortable on a long-term basis as partners, before deciding on something else. So the issue is not at all urgent. That is going to help us in the shorter term anyway.
The other issue is that a lot of fund houses in India are looking at this opportunity to acquire some other companies, as valuations have gone down. So would you look at that strategy, or would you rather play the longer version of the game and build on the company?
We are looking at some options in Europe. We are also looking at all sort of acquisitions globally. But every time you go in for an acquisition, you ask yourself the question: What do I buy for myself? Therefore, while buying now simply because the cost is at the lower side of the market, you really have to wonder whether it is in your interest. We would rather build a strong brand, set up a story and go aggressive on the market.
In India, the regulator wants more disclosures now. They are looking at various other things, like variable load structure. How is that going to affect the market, as products in India are mainly sold through distributors?
In Europe, we are used to such regulations where you have a small entrance fee and then you have a maintenance fee. So I can see that India is probably adopting such standard practices, which we would welcome.
In the Indian market, in the last few days, portfolio investors who were not buying earlier have started buying. Whereas mutual funds are selling. What’s the rationale behind this?
I don’t know exactly, but mutual funds of course do what the industry says. So if there are redemptions, they will have to sell. I think it has more to do with the investors’ views, rather than being a market view.
What sort of an asset growth are you looking at in the coming five years?
We are roughly close to about $1 billion now. So in next five years, we should be at around $3 billion or more.
When do you see the Indian market reviving?
Well, the point here is that, suppose the Indian economy revives by 2011, then the equity market revival will definitely happen a year earlier. So, going by this, the market should recover by the end of this year or early next year.
So is it a good time for people to get into the markets?
May be not now, though the market has been increasing in the last few days. We need to see whether it is a temporary phenomenon or not. We also believe that the US market’s problems have not yet been resolved, and the programme that has been put in place by the US government can be a bit too risky.
So the risk is not out of the market yet. But, by the end of this year, you will see that this programme is working or not. Then people could come forward.
What would be your plans once the market revives?
We would obviously like to launch a lot of products. For instance, last year, we had talked about a lot of products which we could not launch, like technology, clean energy, water etc. We would like to launch these products.