Sundaram MF is among the few AMCs that have delivered consistent profitability in the last five years, says managing director Harsha Viji. In an interview with Ashley Coutinho, he says investors should not try to time the market, but invest systematically through periodical SIPs. Excerpts:
You took over as CEO of the company about a year back. What has been your focus over the year?
We laid out an ambitious plan for growth two years ago and, despite a very difficult industry situation, we are confident of achieving a substantially larger size in the next two years. We are aiming to raise our AUMs to R40,000 crore (from about R14,000 as of September quarter of 2013).
A major highlight for me has been our growth in fixed income products. Traditionally, we have been viewed as an equity fund house, but we have grown debt funds very rapidly and now have a truly balanced offering. From R2,500 crore in debt assets a few years back, we have touched R10,000 crore this year. Our liquid and debt funds are performing consistently.
Several of Sundaram MF?s equity funds have underperformed the benchmarks in the one-year and three-year periods. What steps are you taking to improve the fund performance in the equity segment?
Our equity portfolio is, in many respects, quite different from those of our competitors. A good portion of our funds are sector/theme specific and allow investors to take informed bets on the performance of a certain sector. The fortunes of these funds are tied to their sectors.
Our entertainment fund is delivering excellent returns. We are among the best performers among funds that have energy as a theme. However, the sector itself has been languishing, and we can?t change that.
Also, a large part of our offering consists of funds focused on small- and mid-cap stocks. Sundaram Select Mid Cap, our flagship fund, has delivered 28% returns over 10 years and an SIP in this fund would beat every fund in its class today. Today, these shares are beaten down but still offer excellent value. We are confident that these funds will perform in the future, and we will hold on to the shares with good future potential even if current prices are low.
However, some of our funds have underperformed. We recognise this and it is one of my highest priorities to correct the situation. We have made changes in our fund management team and Krishna Kumar who now heads the equity team is a seasoned hand who has made changes that are already starting to reflect.
Sundaram AMC?s net profit dipped to R11 crore in FY12. How has the AMC fared in FY13?
The AMC industry is tough. If you examine consistent profitability in the last five years, I think only one in 10 AMCs have delivered (outside the top 5), and we are one of them. We run a disciplined business, making sustainable profits without buying AUM. Profit in FY12 dipped to R11 crore from R13.36 crore in FY11, but has risen to R16.86 crore in FY13. We are on track for growing our AUM and profits.
How are you expanding your reach beyond top 15 cities, given the incentives given by the market regulator in this regard?
The Sundaram Group?s strength has always been beyond the top metros. Our auto and mortgage lending businesses have a wide reach of 500-plus points of distribution, and through group distribution and our own efforts, Sundaram Mutual has been present beyond the top 15 cities since the start. So, ?retail? is where our heart is. Sebi incentives are definitely a help, but our impetus here is strategic and not driven by incentives.
What plans do you have as a fund house for the year ahead?
The capital market has been quite volatile in all asset classes. But we are navigating the maze as best we can. We want to be leaner and quicker in responding to the market than we have in the past. Our quick response to the spike in yields post July 15 is a good example of that as we launched fixed-term plans quickly, garnering a far higher share of flows than we have in the past.
We are also considering more dividends to investors. We recently declared a dividend in our Global Advantage fund and we will now look for opportunities as and when distributable surplus accumulates. We are also investing in technology, processes and people.
What kind of products do you plan to add to your bouquet?
Adding to our product pipeline is really not the key for us this year as the market sentiment now, particularly in equity, is not conducive to new launches. But we will perhaps launch a dynamic bond fund and an RGESS scheme subject to Sebi approvals.
What is your advice to mutual fund investors at this point in time?
The real value we can deliver is in long-term equity. The way to invest in equity is not to time the market, but a periodical SIP that dramatically reduces the volatility in the long term. In this environment, I would still recommend a five-year equity SIP in one of our funds, Select Midcap as the best option. Only investment in equities can reliably beat inflation over the long term.