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Due to regulatory overhaul of the sector, mutual funds are one of the most transparent financial products. Dinesh Khara, managing director at the country's sixth-largest fund house SBI Mutual Fund, tells Chandan Kishore Kant that mutual funds are a niche product with a restrictive nature. Excerpts:
Despite having a strong sponsor, your fund house hasn’t been able to break into the top league.
Being not in the ‘top five’ is something I do not like. We are making organised efforts in that direction and trying to leverage the State Bank of India (SBI)'s distribution channels. We hope it will get us the desired results. For the last several years, the market was not good and there was only a push factor. The environment has turned congenial with existence of both pull as well as push factors. Earlier this year, we also opened new 51 branches of our own; we target to bring in 10 per cent of the bank deposit size in these locations.
Is there any target of asset mobilisation from these new branches?
We had a target of mobilising about Rs 1,000 crore from these branches in a year. So far, we have succeeded in achieving Rs 400 crore — 40 per cent of our target. By March next year, I hope we will meet our target. Apart from this, the intention of opening new branches was also to develop distributors in those regions. Our effort is to reach out to the opinion-makers in those areas — teachers, doctors and government servants, among others.
What difficulties do you find in reaching out to investors with your products?
A mutual fund is a niche product as against banking, a commodity product. Customers of banking sector and those of mutual funds are miles apart. When it comes to the latter industry, there is no mechanism through which you can highlight the performance. If the equity scheme has given a 20 per cent compound annual growth return in five years, we cannot showcase that given the regulatory framework. Only investors with some risk appetite tend to come to mutual funds. Or investors who have high income and have to pay higher taxes look for a vehicle as mutual fund is also perceived to be a tax-efficient vehicle. We have to give a disclaimer mutual funds are subject to market risks. When a common investor looks at mutual funds, he thinks even before I am putting money I am being told that there is risk involved. Then he says his deposits with banks are safe. So, while tapping the common man in the equity culture, this hampers. Rather, we should write mutual fund investments are subject to market risks like any other investment.
What are the new parameters you are adding to SBI Mutual Fund?
This product requires a lot of marketing. When I say marketing, I also mean that we have to develop a market. So, to that extent it's a challenge. Skills are needed to sell mutual fund products. I would draw a parallel with that of a medical representative who needs to understand about medicines, its implication, etc. when he talks to the doctor. Similarly, here also our marketing representative or relationship manager, when he goes and talks to the investors, he has to talk about the market, how the economy is likely (to perform), while talking about the product and the philosophy the fund house believes in. And that is the reason, when it comes to aggressive marketing, we have identified five products such as LargeCap, MidCap, ELSS and Debt Fund. Intention is that size of these funds should grow and they reach a level which we can optimally manage well.
