'It Is Encouraging To See The Industry Crossing New Milestones In Quick Succession'

Rajnish Narula, CEO of Canara Robeco Mutual Fund speaks with BW Businessworld on how he views the rapid industry growth of the previous fiscal, on his take on direct plans of MF's, and how his AMC plans to promote investor awareness in FY18.

How was FY17 for Canara Robeco? Tell us a bit about some of the important milestones that your AMC crossed in the last fiscal.
Canara Robeco is entering the tenth year of the joint venture that was established in 2007, and has seen significant success in the last year on many fronts. Our cooperation with Canara Bank is deepening across the network of the Bank, and we are committed to working with them to grow the suite of offerings to Canara Bank's 76 million customers in the years to come. Canara Bank already contributes as our single largest distribution partner. Over the last few years our distribution partnerships with IFAs & National Distributors has also yielded very good results and we continue to invest in nurturing these relationships across T15/B15 markets since we strongly believe that Indian investors will continue to seek expert professional advice on their Asset Allocation & Financial Savings decisions.

On the back of the growth of the retail investor, Canara Robeco has also invested time and effort into getting closer to the customers & intermediaries. As a result, we are investing in opening new offices across the country. We already extended our presence in three major centres last year, and would be opening more offices in the months ahead to serve the institutional and retail clientele & partners better. Our association with Robeco is also providing us exposure to investors outside the country who are interested in investing in Indian capabilities, and we continue to closely work with Robeco and these clients to bring Indian investment solutions to them.

In terms of AUM, we have witnessed large growth in FY17, coming from investors brought in by the Bank as well as our other distribution partners. We saw approximately 30 per cent growth in AUM in FY17. We also saw a boost in our profitability over FY16. Over the year, we have worked hard to serve the best interests of our investors, and this effort was recognised recently by Thomson Lipper, where Canara Robeco AMC was awarded the Best Bond Fund Group 2017 (for 3 yr performance).

The MF industry is going great guns, having crossed 19 lakh crore of AUM in April. It's getting progressively easier to garner retail moneys into equities… Is this a dangerous trend?
It is encouraging to see the industry crossing new milestones in quick succession. Till sometime back we spoke of how low the penetration of mutual funds in India was or how mutual funds were perceived to be money invested in equity market to make a quick buck. Investor education and focus on beyond the top 15 locations has helped change to what we see now. Most new retail investors invest through the systematic route which is also good for them as it evens out market volatility. Having said that, there is still a long way to go.

On the trend of retail money flowing into equities, what is more dangerous, investing in equities for the long term to capture the potential of better inflation adjusted returns or locking money in unproductive real assets? It would have been worrying if the colour of the money was speculative and opportunistic, but as seen in the last few months, investors have either stayed put or invested more when equity markets corrected on FII selling. Hope this trend continues in the future as well.

What's your take on direct plans? Do you see a risk in first time investors going direct, particularly if they are unadvised?
As on now direct plans are predominantly used by institutional investors or informed investors who are globally termed as 'sophisticated investors'. To mitigate the risk of uninformed investors investing in high risk products like say for instance sectoral equity funds, one could consider keeping higher investment cutoff just like in case of portfolio management or AIFs. Direct plans are like Chemist shops. If a patient comes for over-the-counter medicines the chemist will not know whether the patient has gone through a full diagnosis of the disease. Likewise, a direct plan investor is expected to know what is suitable for her and if that's not the case she is better off investing through an expert. The direct plan may be less expensive first, but may be costly later if the wrong asset class or fund is chosen.

Canara Robeco has been aggressive in promoting its equity funds for the past few months. Is it still a good time to be entering equities, or should investors exercise caution and aim for lower risk funds at this stage?
The Indian equity market is finally starting to get its share of the attention it deserved. The Indian economy is on a strong footing fundamentally, structurally and in terms of political stability. Government reforms are providing a tailwind to the high economic growth witnessed over the past few years. The strong macroeconomic condition with the economy geared to shift from informal to formal could provide confidence to the investors and improve the market sentiments. All this and easy liquidity is pushing up market levels to newer highs. These are unchartered territories and I can understand the apprehension in the minds of the investors.

While our funds have been performing well and especially Canara Robeco Emerging Equities, which has one of the highest SIP returns over the long term (10 years), we have been equally promoting our debt funds which offer good returns at relatively lower risks. How an investor should invest is a function of a number of variables including the investors risk profile, returns expectations and other constraints like liquidity, tax status, etc. If the investor is well advised in terms of asset allocation, regular rebalancing, not going overboard on any one particular asset class or individual asset, not timing the entry and exit since it will never be possible to get the bottom or the top right at all points in time, etc. there is no cause for panic. Needless to say, systematic routes like Systematic Investment Plan (SIP) and Systematic Transfer Plan (STP) are the best methods of investing in equity mutual funds at all points in time.

SIP's have been all the rage off late, with close to 75 lakhs being added in the last fiscal. Do you see these SIP's continuing even if markets were to head south?
Again, we are all in unchartered territory and nothing can be said for certain. The last few bouts of market correction have seen SIP investors weathering the pain. What level of southward movement will cause investors to panic and stop their SIPs is anyone's guess, but we expect them to be more resilient now as compared to a few years back given the recent experience. A lot of investor education, both by mutual funds and distributors, has led us to this happy situation.

Are you planning anything innovative on the Investor Awareness front this year? Are you planning to get celebrities to endorse your company's schemes, given SEBI's recent regulations allowing them?
SEBI's recent regulations allow mutual funds to use celebrity endorsement at the industry level. No particular AMC or specific mutual fund scheme can be promoted through celebrities. This year we would continue to expand the activities and initiatives that we have been conducting under SmarTomorrows - an Investor Awareness Initiative that was started in 2014. This was envisaged as a series of activities and communication initiatives aimed at propagating the concept of Mutual Funds Investing to the Indian investors in a simple and coherent manner. The smarTomorrows campaign endeavours to highlight fundamentals around investing and various opportunities that Mutual Funds provide towards ensuring a financially secure future. We would continue to expand our IE initiative though IE programs and various communications by reaching out to more number of locations across India & also by expanding smarTomorrows as a financial literacy programme to reach out to school & college children. Under our CSR initiative we have tied-up with the Goa state government on a pilot basis to educate children of class 8 on financial concepts in a fun and learning format. We intend to expand this to as many schools as possible in the coming years.