No room for me-too players in MF biz: Aashish Somaiyaa of White Oak Capital

While the MF industry has grown manifold over the past decade, the number of players have shrunk, says the CEO of the investment management firm in a Q&A

While the mutual fund (MF) industry has grown manifold over the past decade, the number of players have shrunk, says Aashish Somaiyaa, Chief Executive Officer, White Oak Capital, which has recently entered the MF space by acquiring Yes MF. In an interview with Chirag Madia, Somaiyaa says there is space for hundreds of new players as long as they bring something new to the table. Edited excerpts:

Several new players are entering the MF space. Is there scope for everyone to grow?

During the past 10 years, the assets under management (AUM) have risen over four times and in the past five years alone, the number of unique investors, SIPs (systematic investment plans) and folio counts have gone up 3-5 times. In this entire phase, the number of players in the industry has shrunk. So I find it odd when someone asks me if there is space for more players. If we are all going to conduct ourselves in a me-too fashion there is no space for even a single player more but if we add performance, differentiated perspectives to investing, diversity in product range, ease of access and great service to our investors, then there is space for a hundred more. It’s a question of what each player has to contribute.

What was the rationale behind acquiring Yes Mutual Fund? Does it ease the process of setting up an AMC ground up?

Yes AMC is an up and running organisation, which has put systems and processes and a good team in place. We intend to integrate Yes AMC into the White Oak group and then build further along with the team by augmenting it and providing more resources and significantly enhancing the product bouquet. Having an organisation in place can make the process quicker, but I would say that in any form or format acceptable under Indian regulations, White Oak Group would have either way made a mutual fund foray because that is the ideal format to service retail investors. We will build a full-service AMC with over 100 locations across the country in the next 12-24 months and an omni-channel presence serving distributors and investors.

What will the growth strategy and focus areas be? How will White Oak Capital differ from other players in the sector?

What differentiates White Oak is our unique manufacturing background. Several new entrants are specialists in distribution, yet others have a strong digital/fintech background. While having a strong distribution or a technological background is no doubt a critical success factor, what sets us apart is that we already have a strong track record of investment management and performance. White Oak Group manages totally in excess of Rs 40,000 crore of assets invested into India from investors globally. Our investment team is among the most well-resourced teams with several professionals having considerable experience in managing investment assets, both in India and globally.

What kind of products will you be looking to launch?

To start with, our focus is going to be on actively-managed equity funds. We will look to launch diversified equity funds first, which is closest to our style of management because if you see White Oak as a house, we are sector-agnostic and market-cap agnostic. As a result, our first approach would be to create domestic equity funds with a multi-cap, flexi-cap, large- and mid-cap, mixed market capitalisation kind of strategies. Also, White Oak’s investment team has several professionals, with considerable experience in managing international equity assets. So, over time, we may also want to leverage this expertise in the team and look at some emerging market products. Yes AMC already has some fixed income offerings, so we will eventually look to build on those fixed income offerings as well. Sequentially, it should be domestic equity, global equity and then hybrid, multi-asset and fixed income.

Equity funds have seen record inflows in the last few months, do you think this trend will continue even if there is market correction?

The last couple of years have shown the domestic investors have by and large become resilient and there is now a critical mass of seasoned investors with multi-cycle experience of witnessing equity markets. You will see redemptions from time to time as investors have a wider range of options to switch within the large boutique of offerings from the mutual funds. But these are just short-term trends.

Regulations have been significantly tightened for the MF industry recently. Do you see them as headwinds or tailwinds?

I do not see them as headwinds and industry growth has shown that they are not headwinds. Standardisation of products and practices makes it easier for investors to understand and access. While it has curtailed investment latitude and commercial latitude by a small margin that does result in scope for alternative products. I see nothing wrong with that because mutual funds are mass retail vehicles and complexity of any sort is best handled outside the mutual fund arena for sophisticated investors.