 "We are considered serious competitors now: Leo Puri")
It’s almost two years that Leo Puri took over as managing director of UTI Mutual Fund. During this period, the fund house has increased its average assets under management by Rs 18,000 to Rs 93,000 crore. Puri tells Joydeep Ghosh the recent sell-off in the markets is good because it will cool unrealistic expectations. Edited excerpts:
How have things changed in UTI Mutual Fund in the past 2 years?
The organisation is one with a strong foundation. What was required was to re-establish the sense of purpose and aspiration to be in a position of leadership. What we managed to do is establish why we are here. Strengths had to be identified and developed. For example, we had distribution but not in a uniform manner. So we built distribution with banks and independent financial advisors. The share of banks and big distributors has gone up by 30-40 per cent.
Any particular weakness that you had to address?
Some of our people processes had degenerareted when benchmarked against professional meritocracy, it was clear that intervention was needed. For example, seniority is helpful only if your peers recognise it. It is not an entitlement. That was not an easy process but now things have settled. We have not recruited a lot partly because we have a productivity challenge. We have more people than our peers. Growth is the way out of this. This year, we hope, we can start recruitment.
When is the AUM likely to cross Rs 1 lakh crore?
As an asset manager, we are already at Rs 1.54 lakh crore. The Amfi numbers just give the assets of the mutual fund business but as a standalone asset manager, I have a number of other businesses. We manage Rs 93,000 crore in the mutual fund, another Rs 18,000 crore in PMS, Rs 24,800 crore in retirement solutions, Rs 14,000 crore in UTI International and another Rs 3,000 crore in other businesses. We are looking to cross Rs 2 lakh crore this year and in the mutual fund business, we expect to cross Rs l lakh crore as well. However, in a country like India, we should be targeting Rs 5 lakh crore.
How much has the rising market contributed to growth in assets?
This was a year of equities. So, if my net assets had fallen by Rs 2,600 crore last year, it rose by Rs 3000 crore this year – a positive of Rs 6,000 crore. Overall, due to market appreciation, equity assets would have risen by over 12,000 crore. Most fund houses, thankfully in India, still outperform indices. And with the Sensex and Nifty rising by 25 per cent and mid-cap rising by 55-60 per cent, AUMs of most fund houses would have risen by 30-40 per cent due to market appreciation.
After the initial euphoria about the new government, is the interest waning now?
The only decision that one has to make right now is whether you are in the camp that says that the government has run out of time already or is it worth being more patient. I would be inclined to be a little more patient. There are some very difficult tasks like land, labour, financial reform.
The only problem I see is that the capability building within the government should have been faster. By now, it should be clearer to us that there is a broad-based capability in place that will take care of this ambitious agenda both in the political and bureaucratic arena. That isn’t coming through yet. But I am hopeful that it will get addressed.
Are FIIs are taking a very short-term view?
FIIs largely bought India as a macro bet. In fact, two-thirds or 70 per cent credit for the market rise should go to macros and 30 per cent to sentiment. Now, the macro isn’t so good and sentiment has weakened. Expectations based on macro were unrealistic. There were expectations that earnings will rise 20 per cent. How was it supposed to happen when we were in a cycle in which there were no investments (capex). It isn’t a bad thing that things are cooling down. It is a healthy reminder that we have to work for our future and there are no messiahs.
Where did FIIs go wrong?
Things were so good that many FIIs did not need to lift up the lid and look. Now, that they have to look for the next big leg up, they have to lift the lid and they are seeing what every Indian knows – complex governance systems which don’t move as quickly as they like and age-old battles like land and labour are still being fought. So, there is a sudden recoiling. For Indian investors, this isn’t something new.
FIIs also need to learn not to overreact to some of the noise that comes out of India. If you just listen to the noise, you will think there is anarchy and chaos which is not true. FIIs are also reacting to the very loud amplification of problems by Indians themselves. The noise coming out of corporate India or policy influencers has been largely negative for the last three or four months. So, any global investor who wants to feel the pulse is responding to that. Many other cultures are not so loud. The Chinese famously don’t do it. We were foolish enough to take credit for the market rise in the first place, so we are saddled with the discredit now.
Are decisions getting delayed because of too much centralisation of power?
Concentration of power, in itself, is not a problem. You will see that in the early stages of a new government that comes to power. It might be a precursor to letting things loose again. First tightening then loosening is the logical way for a go when you have an ambitious agenda. That doesn’t surprise me. Less government, more governance that is what you want to see. Are you getting that sense? That is a function of right people in right roles. That is what has to change. That has not happened. We would like to think that is round the corner.
How have things changed in UTI Mutual Fund in the past 2 years?
The organisation is one with a strong foundation. What was required was to re-establish the sense of purpose and aspiration to be in a position of leadership. What we managed to do is establish why we are here. Strengths had to be identified and developed. For example, we had distribution but not in a uniform manner. So we built distribution with banks and independent financial advisors. The share of banks and big distributors has gone up by 30-40 per cent.
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It gives me a lot of satisfaction because we were able to demonstrate this change in attitude when the markets turned around. When the institution wasn’t focused, and it has happened in the past, it was unable to participate in the rising market. You are only tested when you run a hard race. We were able to road test our distribution, marketing and motivational strategies when the markets turned around.
Any particular weakness that you had to address?
Some of our people processes had degenerareted when benchmarked against professional meritocracy, it was clear that intervention was needed. For example, seniority is helpful only if your peers recognise it. It is not an entitlement. That was not an easy process but now things have settled. We have not recruited a lot partly because we have a productivity challenge. We have more people than our peers. Growth is the way out of this. This year, we hope, we can start recruitment.
When is the AUM likely to cross Rs 1 lakh crore?
As an asset manager, we are already at Rs 1.54 lakh crore. The Amfi numbers just give the assets of the mutual fund business but as a standalone asset manager, I have a number of other businesses. We manage Rs 93,000 crore in the mutual fund, another Rs 18,000 crore in PMS, Rs 24,800 crore in retirement solutions, Rs 14,000 crore in UTI International and another Rs 3,000 crore in other businesses. We are looking to cross Rs 2 lakh crore this year and in the mutual fund business, we expect to cross Rs l lakh crore as well. However, in a country like India, we should be targeting Rs 5 lakh crore.
How much has the rising market contributed to growth in assets?
This was a year of equities. So, if my net assets had fallen by Rs 2,600 crore last year, it rose by Rs 3000 crore this year – a positive of Rs 6,000 crore. Overall, due to market appreciation, equity assets would have risen by over 12,000 crore. Most fund houses, thankfully in India, still outperform indices. And with the Sensex and Nifty rising by 25 per cent and mid-cap rising by 55-60 per cent, AUMs of most fund houses would have risen by 30-40 per cent due to market appreciation.
After the initial euphoria about the new government, is the interest waning now?
The only decision that one has to make right now is whether you are in the camp that says that the government has run out of time already or is it worth being more patient. I would be inclined to be a little more patient. There are some very difficult tasks like land, labour, financial reform.
The only problem I see is that the capability building within the government should have been faster. By now, it should be clearer to us that there is a broad-based capability in place that will take care of this ambitious agenda both in the political and bureaucratic arena. That isn’t coming through yet. But I am hopeful that it will get addressed.
Are FIIs are taking a very short-term view?
FIIs largely bought India as a macro bet. In fact, two-thirds or 70 per cent credit for the market rise should go to macros and 30 per cent to sentiment. Now, the macro isn’t so good and sentiment has weakened. Expectations based on macro were unrealistic. There were expectations that earnings will rise 20 per cent. How was it supposed to happen when we were in a cycle in which there were no investments (capex). It isn’t a bad thing that things are cooling down. It is a healthy reminder that we have to work for our future and there are no messiahs.
Where did FIIs go wrong?
Things were so good that many FIIs did not need to lift up the lid and look. Now, that they have to look for the next big leg up, they have to lift the lid and they are seeing what every Indian knows – complex governance systems which don’t move as quickly as they like and age-old battles like land and labour are still being fought. So, there is a sudden recoiling. For Indian investors, this isn’t something new.
FIIs also need to learn not to overreact to some of the noise that comes out of India. If you just listen to the noise, you will think there is anarchy and chaos which is not true. FIIs are also reacting to the very loud amplification of problems by Indians themselves. The noise coming out of corporate India or policy influencers has been largely negative for the last three or four months. So, any global investor who wants to feel the pulse is responding to that. Many other cultures are not so loud. The Chinese famously don’t do it. We were foolish enough to take credit for the market rise in the first place, so we are saddled with the discredit now.
Are decisions getting delayed because of too much centralisation of power?
Concentration of power, in itself, is not a problem. You will see that in the early stages of a new government that comes to power. It might be a precursor to letting things loose again. First tightening then loosening is the logical way for a go when you have an ambitious agenda. That doesn’t surprise me. Less government, more governance that is what you want to see. Are you getting that sense? That is a function of right people in right roles. That is what has to change. That has not happened. We would like to think that is round the corner.