Going ahead, we want to go more digital; AI to help fund managers: Chairman of DSP BlackRock Investment Managers

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New Delhi | Updated: May 10, 2018 3:10:47 PM

In an interview with Chirag Madia, Kothari shares his future plans, which include expansion and an increase in its online presence.

Hemendra Kothari, dsp groupHemendra Kothari

A day after DSP Group and US-based BlackRock ended their mutual fund joint venture — DSP BlackRock Investment Managers Pvt Ltd — Hemendra Kothari, chairman of DSP BlackRock Investment Managers, says the company will be family-owned but professionally managed. In an interview with Chirag Madia, Kothari shares his future plans, which include expansion and an increase in its online presence. Excerpts:

What are the key reasons for parting ways with DSP BlackRock?

BlackRock felt that it would like to integrate its business.When they came to me few months back, they asked me to integrate the business. But I said I may not like to dilute the stake and they wanted absolute majority. I did not want to be minority… I was very clear from day one. So discussion went on and they tried to convince me that it would be a great thing but I was not convinced. The parting of ways was on a friendly note. I said I don’t want to sell and they said they want to buy, but neither of us wanted to remain minority. Having a minority stake without having any say is no meaning for me as this is a historical company in India. I have the highest regard for BlackRock and we have not parted with any ill will.

Did BlackRock indicate that it will come to India independently?

I don’t think BlackRock is going to come independently in the foreseeable future. But the company is looking for investments in infrastructure, private equity or real estate. By and large, the world over, it has not gone into retail business, except in the UK. Its interest remains investment in infrastructure and private equity side of the business which it may continue.

What will be your future plans for the company?

We will be a family-owned but professionally-managed company. That is our objective. More qualified and educated people will be taken from the industry or from the university directly. We want to grow and go more digital and we want to see scientific-research based investments. We are creating funds. We came out with a fund which is Nifty 50 in which we are giving equal weightage every three months. So, if some stocks go up 20%, it automatically books profits. It has beaten the index by 4-5% over the past year. We are looking these such products. How can we be different than somebody else in a scientific way, seeing the past and whether it has performed. We want to go internationally and locally. We want to expand and we want to digitise and increase our online presence. We want to bring in new products. We can take decisions faster.

What will be your investment strategy post the exit of BlackRock?

There are certain products that are dependent on certain philosophy. The important question is whether we have done fundamental research on it or not, which is very important point for us. One can bring technology and artificial intelligence to help the fund manager and we are working on it. It will evolve on all those aspects. We will be doing all these things in the future. At the same time, we are creating process-based investments and every week we have discussions with the fund managers and team. Apart from this, we have strong team on equity and we have lot of depth. A few people leaving the organisation is not going to make any difference to us. That is why I always encourage professionalism in the company. The family will be owning the company but it will be run professionally. That’s my motto… in the past and even now.

We have seen several foreign fund houses exiting India. What according to you would be key reasons for their exits?

I think reasons for them exiting India are very different. Those days, fund management was very slow, size was small and that could be a reason for them to exit. They thought that the industry is not going to grow. There were various restrictions, concerns from the compliance point of view from within India and the US. But today, the constraints are comparatively less. They (foreign fund houses) may want to come back to India now. But the question remains whether they have the appetite to go into the retail business and talk to retail investors and Indian institutional investors. Sometimes they think it’s too tedious in India and amounts are too small. They are known to work with institutions… like BlackRock is known to work with large institutions like sovereign money, pension funds and insurance companies.

In the last few years we have seen huge money flowing into mutual funds, especially into equity funds. Do you think this trend will continue going forward?

I think the growth has just started. There will be slight up and down. When markets are going down, flows will also slow down. But I think in the next two years, it will he higher than last two years, comparatively. The growth will be there, though it might be slower. In India, mutual fund industry has not got much penetration. It’s just beginning. People are still used to investment in bank deposits, gold or even simple cash. I think we have to take people to think long-term (5 years and over). While investing in the long run, people have got a lot of money in the business.

What are your view on stocks markets are valuations reasonable?

I am very happy if it (market) remains bullish. But sometimes it might have some impact due to external factors… political factors, geopolitical reason, trade wars reasons, foreign selling could affect us. When the industry grows, economy also grows. Luckily, the MF industry has grown and in the last year, lot of money has gone out also but Indian investors were buying and they were proved right. I think the market is reasonably priced.

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