We couldn't capitalise on the Tata brand: Arvind Sethi

Interview with Chief Executive Officer, Tata Mutual Fund

Less than three weeks before Cyrus Mistry took over the chairmanship of Tata group, the conglomerate's asset management company Tata Mutual Fund appointed its new chief executive officer (CEO) Arvind Sethi last December. For Sethi, this came as a surprise as he was an independent director on the board of Tata Asset Management Limited since April, 2012. But he took up the challenge and shifted his base to Mumbai from Gurgaon.

The AMC's declining performance is not unknown to Sethi (55) and at the same time he is fully aware about what Tata brand stands for. In a conversation with Chandan Kishore Kant, he outlines his strategy and emphasizes on engagement with foot soldiers and market fund products to investors effectively. Excerpts :

 

Tatas seem to be poor when it comes to financial services. Why could not Tata Mutual Fund capitalise on a strong Tata brand?

The brand is strong but the fund performance, and by that I mean consistency, was not there. There has been inconsistencies in our fund performance. Fundamentally, that is one part of the issue. Getting the fund performance right is the biggest objective of the processes what we are currently putting in. Then, the whole sales network and its ability to just sell and engage with the distribution network, being out there in the market and doing loyalty programmes --  I think we did not do a good job. Some of our competitors' sales orientation is to be admired. They are very aggressive and we have not been.

 

So, when can we expect you to replicate the same at Tata AMC?

Work is in progress. To an extent if we can improve the fund performance and get people to believe it, we will improve. You may have fund performance but people may still ignore you. In last three months, our equity segment is in line with industry. Earlier we were losing more than the industry. For the moment, we want to get to the basics and deliver what the Tata brand stands for. I am hoping that we get talked about for all the right things in the next few months. Hopefully, that will give some momentum. Perhaps, I will have a sense in next six months - whether it is working or not. If it is not then we will have to go back to the drawing board.

 

Are you under pressure from the Bombay House?

There is no pressure. Firstly, I have been here just over six months. It's too little time to suddenly show a big turnaround. But, whatever our strategy is, is known to the board and they agree with it. All we are reporting to them is what we are doing in terms of implementing.

 

Since you joined, the fund house has seen exits and entry of lot of people, including senior officials. Is it not affecting sentiments among your investors?

That's a broad concern about the fund house. Other than trying to reassure them that the team is more or less stable we want to move forward. Our team is now in place and we need to execute. Investors are more worried how my funds are being looked after. Fund performance in the debt side of our business has improved in the first quarter. And, now even our equity performances are coming up. Investors will judge us by that. It's a part of the changes we are making. We brought in a new CIO and a new head of sales. It's largely within what we want to do. 

 

What's your game plan for a turnaround?

For us, the Tata brand name is very strong. The independent financial advisors (IFAs) community, in particular, we have been engaging with want us to do well. So, what we have to do is deliver performance. And deliver consistency in engaging with them. We have been a little off and on in the past. So, now we are trying to put in processes and make sure that we meet our distributors every three months, keep communicating to them about how our funds are doing,  especially when they are not doing well. We need to make sure our performance is at reasonable level.

 

What do you mean by reasonable performance?

Being in 1-2 quartile. Even if we have drops, we should come back within a quarter. Every fund manager will have his bad days but the point is one should be able to recover from that. If you look at the rankings all our fund performances are somewhere in the middle. Performances have not been bad but it is also true that it has not been very good either. We want to move it in the better range. That's our attempt.

 

Then why aren't you merging the non-performers with your better performing equity schemes?

We already have merged some but remained in infrastructure. We have debated internally also whether we should move such funds into diversified funds. But if were to do that, certain large investors would be forced to book a loss. And, some investors are not happy with that. Some say they had invested in the infrastructure theme and are happy to remain invested.

 

Do you feel a need for a tie up with some foreign fund houses?

I do not think there is a pressing need for that. If there is a suitable partner then we can think of. As a fund house, we had tie ups before. Rather, we had a couple of foreign partners which did not work out. So, there is a little bit of shyness about that. 

 

Where you want to be three years down the line?

For me, the number we are at is not important. What's important is that we are running a very good fund management business, delivering excellent performance and are highly regarded in the equity and debt categories.