Reliance Mutual Fund (MF) is not just the largest fund house in the country, it also has the largest share of NRI money, according to Sundeep Sikka, CEO, Reliance Capital Asset Management. The fund house, which continues to hold top ranking despite the odds, is gung-ho about the long-term prospects of mutual funds in India — one of the reasons why it has chosen to invest in distributor education on a large scale. In an interview with Vandana, he talks about the AMC's plans this year.
Reliance MF has been selected as one of the managers for the New Pension Scheme (NPS) corpus, the fees of which are very low. What, according to you, will be the main driver for this low-fee business?
We are excited about this opportunity. All bidders are required to form a new subsidiary for the management of pension assets. So, we are in the process of rolling out the new company. The fee is not relevant now, as it is going to be a high-volume game. We believe it will catch up well over the next few years and will be a profitable venture in the long term. The process starts from April 1 and we expect the money to flow in after that. Broadly, we remain committed to retail investors.
What kind of products can one expect from the fund house this year?
We will continue to expand the market. The domestic mutual fund industry is still at a nascent stage. Our focus is still on Tier-III and Tier-IV cities. Going forward, it is important to increase investor and distributor education. We recently launched EDGE learning academy for training distributors. On the product side, our focus is on existing schemes. We will not launch more schemes for now. We have received Sebi approval to launch an infrastructure fund as this was missing in our portfolio. When we feel the valuations are attractive in the sector, we will launch the product. We are also planning to get active on the exchange-traded funds (ETFs) front. We will be seeking approvals for some related products.
How has the industry changed since the October crisis?
A significant change that we will see, going forward, is that there will be some sort of consolidation. It may not necessarily be companies taking over other companies, but may be in the minds of the investors and distributors. Post the crisis, there has been a 4-5 per cent shift in the market share of the top-10 AMCs. Till now, investors were looking only at returns. But now, it’s going to be risk-adjusted returns that will matter. We believe brand strength and track record of AMCs will play the most important role. Investors will like to deal with bigger brands.
What are the plans for offshore asset management?
We are looking at that business also seriously. Currently, we have presence in Dubai, Singapore and the UK. We already have a Reliance Emerging India Fund, based in Mauritius. We are committed to international markets and are looking for opportunities. Global strategy is an important part of our expansion plan. We will be launching new products on the international platform when the time is right.
You have been maintaining high cash levels. How do you justify that?
We have always used cash calls as an investment strategy. It has been successful in the past. We believe opportunities are available selectively. We have been maintaining high levels of cash. Right now also we are about 15-17 per cent in cash. And we invest in small pockets wherever we see an opportunity.
Going ahead considering the market valuations we would look at opportunities to deploy the same.
