'We Believe The Entire Mutual Fund Industry Pie Will Increase'

Swarup Mohanty, the newly appointed CEO of Mirae Asset India, spoke to BW Businessworld on their challenges to growth, the role of IFA’s and Financial Planners in the distribution business, and Mirae Asset’s future plans to take the future head on while remaining patient and sticking to the basics.

1. As the recently appointed CEO of a relatively new and fast growing AMC in an industry dominated by the big players, what challenges do you foresee to your growth in the next 3-5 years?
I have been associated with Mirae Asset now for 5 years, 4½ years as Head of Sales and it is just the beginning of my stint as CEO (6 months). The journey so far has been very satisfying. Mirae Asset has grown 10 times in AUM in the last 3 years. We are now at 4,500 crore of Total AUM of which over 4300 Cr is in Equity Assets. We are already amongst the Top 20 AMC's based on Equity Assets. More importantly, we believe we have created a strong base for our India business with good products, backed with robust performance track record and asset growth without cutting any corners. At this moment our market share of Equity Net Sales has been quite encouraging. In the last 3 years we have been making profits, making our business self-sufficient in India. When you add all of the above, we feel we have made significant progress and we are now a very serious player in the market.

The challenge for us will be to continue this strong growth in the coming years. Our strategy has been to put performance before asset gathering and the market is seeing the benefits of this approach. We also believe in one fund per category, and this is a direction which the regulator also believes the industry should move ahead in. The key would be the stick to this stand, despite all distractions. Our growth ahead lies in this focused approach. We believe that the entire Mutual Fund Industry pie will increase and we will get our fair share of it.

2. What is Mirae Asset (Global)'s view on their Indian business? Are they in it for the long haul and how does the India business fit in with their overall strategy?
Mirae Asset Group was started in 1997 in South Korea (during the Asian crisis) by our chairman - Park Hyeon Joo, and is now expanding into emerging and developed markets. We are now present in 12 countries, which help provide products to market in multiple markets. The main business for Mirae Asset is Mutual Funds and the promoters understand that the initial period is critical for developing products with strong track record. Strong products would then help the size of the business to grow. This is a process we follow for our India business too.

Mirae Asset started its operations in 2008, possibly the worst period for financial markets globally. We believe we have weathered the early storm relatively well. The India business benefited from good AUM on the offshore business which is close to 10,000 crores of equity assets. This helped us tide the tough period (2010-13) and develop our products simultaneously. Our flagship fund Mirae Asset India Opportunities Fund has completed 8 years while Mirae Asset Emerging Bluechip Fund has completed 6 years of strong track record and we are seeing satisfying AUM growth in recent times. Since the last 3 years, our equity assets have grown steadily. We believe that with a base of over 4300 crores in Equity now, our story in India has just started.

3. You are a seasoned sales veteran, having headed sales for Mirae Asset prior to your elevation to CEO. How critical is the support of the IFA community for sales growth in the long term? Do you feel that IFA's are being handed a raw deal in light of SEBI tightening the screws in recent times and will this impact the industry?
For us at Mirae Asset India, the IFAs form the backbone of our business. I have to give credit to the IFAs for having identified our potential when our AUM was below 300 crores. It is due to their support in those days that we were able to grow our assets. Even today the IFAs contribute to around 48% of our total AUM. We remain grateful to them for their support so far and I see no reason why the same would not continue in times to come.

There is a lot of talk on the change in regulations affecting the IFAs in coming times. I do feel that they have not been given the due importance in all discussions so far. The proposal that they would not be referred to "advisors" in coming times is not right is my view. These are individuals who have survived the test of time in our markets over the last two decades and build very strong businesses and loyal investors. The Indian MF investors would gain immensely if both IFAs as well as RIAs existed simultaneously. Advisory would gain with the co-existence of both. They would learn from each other's expertise and hence the investors would only stand to gain in the long run.

4. What disruptions to you see arising in MF distribution models in the next 2-3 years? For instance, what is your take on e-Commerce and Robo Advisory models as a medium for distributing MF's?
I believe investors want to talk to advisors and take their opinion on investing. They do need a lot of hand holding during the process of investing. Recent surveys just reinforce the fact that financial literacy is still very low in India and investors need to be educated on how they should invest in various financial products. Investors need to be more educated in Risk Profiling and importance of Risk adjusted returns (not absolute returns). Goal based investing or financial planning has just started in India. In this environment the role of the financial intermediary becomes extremely critical.

I believe E-Commerce and Robo Advisory will help enlarge the pie for Mutual Funds and provide platform for ease of transactions for informed investors who know where and how to invest.

5. Does Mirae Asset undertake any specific investor awareness initiatives? Please share the nature and outcomes of some of these with us.
Mirae Asset had launched Mirae Asset Knowledge Academy through which we share education content with our investors - we also have a dedicated section on our website which provides loads of content which can be used by them to make informed decisions. We are also leveraging on our global expertise in emerging markets and coming with innovative research content. We carry out Investor Awareness Programs across the country to increase financial literacy.
Mirae Asset was one of the pioneers of SIP (called as RSP) culture in Korea. We are happy to see that we are able to get similar success in India. We have more than 30% of our investors coming through the SIP route and investing with a long term perspective.

6. Lastly, could you share with BW Businessworld some of Mirae Asset Mutual Fund's goals and targets with respect to AUM, unique number of investors, Tier 2 city penetration or anything else?
A Morning Star survey had shown that Investor Returns lag Fund Returns significantly, and we would like to correct this. With help of our partners, we would like to provide our investors a superior investment experience where they can invest in our funds to achieve their goals and create wealth.

In doing the above we also have an incidental target to break into the Top 15 Equity AMC's and medium term target to be amongst the Top 20 AMCs based on overall AUM. We have started working in some Tier 2 cities in the last one year and the progress has been satisfactory. We are not an AMC in a hurry. We do believe in building a very strong base for our products with a diverse investor base.