Power performer

KNOW YOUR FUND MANAGER

N Sethuram

A clear-cut focus helped N Sethuram earn his stripes as a fund manager par excellence.

It was not the easiest of transition for a career banker to the world of mutual funds. The markets went into a free fall during the 2001 meltdown and Sethuram had to contend with a bunch of underperforming funds when he took over as a CIO of SBI Mutual Fund (SBI MF) in 2003.

He turned around the fund's fortunes by changing its focus, doing away with bureaucratic decision-making and ensuring that performances were in line with targets.

The total assets under management of SBI when he took charge were Rs 3,200 crore, and three and a half years later they have sprinted past the Rs 14,000 crore mark.

First steps

The biggest challenge for him was to understand the nuances of his job and then to identify what went wrong with SBI's schemes. "Fund management was a completely different job for me as I have spent most of my career in banking," he says.

Sethuram has been with SBI since the last 30 years. Before joining SBI Mutual Fund, Sethuram was the senior vice president, credit and investments at SBI's Tokyo branch.

Aiming high

As the CIO, Sethuram's job is to look at product design, new product launches and participate in asset allocation decision making.

But when Sethuram joined SBI MF, the most important task for him was to improve the performance of all the schemes and bring them into the top quartile.

Sethuram not only managed to do that but helped the fund bag a number of awards. SBI Magnum Balanced Fund was ranked ahead of others in its category in February 2004 while SBI Magnum Global Fund was in the top quartile in April 2004 (Value Research).

Also, in 2005, SBI MF bagged five ICRA Online awards and in 2006 they bagged eight ICRA Online awards, four CNBC Crisil awards and four Lipper awards.

Lacking focus

So, how did Sethuram manage to deliver such amazing performance? After analysing all the schemes he realised that none of the schemes had a clear cut focus. He says, "We changed the focus of all the schemes."

For instance, SBI Magnum Global Fund, which was earlier a diversified equity fund, was repositioned as an aggressive midcap fund in 2003. Also, the SBI Magnum Equity Fund was repositioned as a purely large-cap fund.

Further, he cut large exposures to a particular sector. "We had a large allocation to the IT sector and it took a hit," says Sethuram. The next step was to streamline their investment policies.

"Earlier we had a committee approach to investments which required all investment decisions to pass through the committee which was a time-consuming process. So, we gave a free hand to fund managers to buy frontline stocks without taking anybody's permission."

Also, Sethuram set performance targets for fund managers and made it clear that their aim was to be in the top quartile in every scheme.

"With these changes, our funds started improving and by February 2004 most of our funds were performing well and have continuously been on top since the last two and a half years," he proudly asserts. 
 

SETHURAM'S PERFORMANCE Scheme Performance (%) as on July 21, 2006
Scheme	1 year
Magnum Contra Fund	41.78
Magnum Equity Fund	40.85
Magnum Global Fund	38.11
Magnum Multiplier Plus	40.10
BSE 100	29.50

Market view

Speaking about the market, Sethuram says, "We look at the markets on a medium-to-long-term basis. In the short-term there is a lot of volatility. But, in the long-term our view is positive as India is on a high-growth trajectory with a GDP growth over 7 per cent and there is balanced growth across sectors."

Sethuram is currently bullish on sectors such as engineering, capital goods and cement, due to the infrastructure growth taking place in the country. He is also bullish on the IT sector due to its business prospects and the depreciating rupee which improves margins.

He is not bearish on any sector as he believes that there are good picks available in every sector. He is wary of the oil and gas sector as pricing uncertainties still exist.

Predicting the future

Astrology is one of Sethuram's hobbies but he is careful practitioner. He believes that the art must be used in the "right" way to help others and should not be misused. He recounts an incident when one of his acquaintances was worried that he may die due to a heart problem.

Sethuram assured him that everything was fine and the man is still alive today. One is forced to think that such knowledge must have helped Sethuram in his business too.

However, he says, "I don't mix my hobby and work. I don't use it in my work as my knowledge on 'business astrology' is not so strong."

On how investors should react to the current volatility, Sethuram says that they should not panic and always invest with a long-term horizon. Thanks to his steady, focussed approach, SBI Mutual Fund is scaling new peaks.