SBI Mutual Fund sprang a surprise by attracting the largest inflow last fiscal, pipping all the leading mutual funds to top the assets under management (AUM) table. Despite the Covid-19 pandemic causing havoc in the equity markets, SBI Mutual Fund surprised everyone with its sterling performance on all counts. BusinessLine spoke to Ashwani Bhatia, Managing Director and CEO, SBI MF, to understand the fund’s strategy and way ahead. Excerpts:
What made SBI MF emerge as the largest MF?
Our journey to the top is the result of the hard work put in over the last five to seven years. The collective efforts made us grow at the rate of double that of the industry. Also, we were able to increase our customer-base and entered niche segments where other players had limited presence. With the SBI culture and the reach provided by the brand, we were able to establish presence in smaller markets. Further, the partnership with Amundi helped open more doors for us in the global market, adding to our growth story.
What is the reason for SBI MF registering highest AUM growth last fiscal when others either fell or registered flat growth?
We have excelled in all the three pillars of growth in the mutual fund business ― performance, investor connect and consistent investment process. Also, we did not have too many accidents during the crisis in the credit market. We were able to manage the risk well before it became a bigger issue. This, along with expanding reach into newer areas, have helped us gather more business. Moreover, our equity scheme performance has been decent. Additionally, strong support from our parent has enabled us to provide solutions to different investor categories based on their financial needs.
Should EPFO pump more money now into equity when the markets are at record lows?
PFs generally invest for the long term in a systematic manner and long-term investors are not swayed by short-term market movements. However, in general, we believe that this is a good time to increase exposure to the equity market. Valuations are currently attractive and present good opportunities to build wealth.
Has SBI MF’s focus on ESG funds helped it beat the current market mayhem?
Over the last few years, it has become increasingly clear that companies that have focussed more on value creation rather than maximising short-term profitability have been rewarded well by investors. There have been a number of mishaps on the governance front for businesses over the last few years. Markets will reward companies that are better at stakeholder value creation. The proof of the pudding is in the relative performance of our SBI Magnum ESG Fund which has been doing well and our PMS strategy over the last few years.
How do you see inflow for SBI MF this fiscal?
Going forward, we hope to continue our growth momentum and enter new geographies. One of the keys to keep flows coming is to create the right experience for the investors by providing financial solutions rather than products. The idea is to address the financial goals and needs of the investors. Flows will naturally follow once the investor gains confidence in mutual funds. In recent times, the industry has done a tremendous job of reaching out to customers and increasing awareness about mutual funds.
How come SIP inflows has remained robust despite equity investors’ incurring huge losses?
The last three years’ returns of diversified equity funds have been between zero and negative 8-10 per cent. However, this has not deterred long-term investors. The role of investor education has played an important role. Investors today understand the importance of staying invested through the volatility. The experiences of the past have made investors wiser. Any decline in AUM that we saw could be due to fall in the value of investments. The industry saw monthly inflows of ₹8,641 crore in March, up from ₹8,055 crore logged in March 2019, showing that investors have continued investing through the volatility.
Over the last three to five years, most SIPs have come in the perpetual mode. So, the auto cancellation of SIPs does not get triggered, which also has helped in maintaining continued SIP flows.
What is your advice to mutual fund investors at this current market condition?
Markets will continue to be volatile going forward as we deal with the Covid-19 outbreak. The most efficient way to beat market volatility in the current times is to diversify exposure and improve the asset allocation. Investors should diversify their investments not only across asset classes but also within an asset class. A good mix of equity and debt can help enhance the overall portfolio value. Most people associate only equity investments with mutual funds. But the industry has a whole range of debt fund products which can add significant value.