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Monday, Nov 11, 2002

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`We have no special bias to debt or equity' — Mr Sanjay Prakash, CEO of HSBC MF

Nilanjan Dey

HSBC Mutual Fund is the latest player in the market. Set to enter with four schemes, including one focussed on equities and another targeting institutional investors, the fund may well bring with it a breath of fresh air.

Or so hopes Mr Sanjay Prakash, Chief Executive Officer.

Excerpts from the interview

Given that three of your products are debt-oriented, what's your take on the debt market?

The cuts in the bank rate, CRR and repo rate in the credit policy on the back of benign monetary indicators have resulted in yields moving lower by around 5-10 bps across the yield curve. These measures ensure the sustenance of softer rates in the short to medium term. The Reserve Bank of India, however, has moved from a `soft' interest rate bias to a `stable' interest rate bias for the next six months unless the economy deteriorates. Liquidity will continue to be the main driver with the 10-year gilt yield trading at a range of 6.9-7.1 per cent.

The market will keenly watch inflation, credit offtake and the extent of government borrowing programme overshooting budgeted figures. Should liquidity continue at current levels, there is a possibility of another repo rate cut.

What led you to come out with an equity scheme at the very beginning?

Globally HSBC Asset Management handles considerable doses of equity money. We have an offshore fund, HGIF India Equity, solely dedicated to the domestic market. This has an AA rating from Standard & Poor's and a five star rating from Morningstar. Incidentally, Mr Sanjiv Duggal, who managed this fund, has relocated to India as our Chief Investment Officer.

What are your views on equity investments?

There is a distinct investment philosophy, which is used across our global fund range. We are `business cycle, relative value' investors, adopting neither a purely `value' or a purely `growth' approach. The style is modified to suit the prevailing economic conditions. The idea is to ascertain where we are in a business cycle and where relative value exists. We propose to run diversified portfolios and contain risk within specified levels by following internal guidelines. The composition will be determined by analysis of business cycles to identify those sectors that offer value relative to the market. The impact of government policies and India's competitive advantages will be the key considerations.

When it comes to distribution, to what extent will you depend on the parent bank?

Our sales model is B2B, which implies that sales will be done through established distributors of mutual funds. The fund will tie up with quality players and ensure that their service needs are met.

The bank, mind you, is a major distributor itself. We are hopeful that it will contribute significantly to the growth of our asset management business. Money is expected to come in from diverse segments, including our own clients and depositors, high net worth individuals and corporates. Over time, the fund will try to penetrate deeper into the retail segment.

The institutional fund strikes a different note ...

It does. The idea is to cater to the special needs of institutional customers. While it has lower expense ratios, the more important thing is that the fund will be managed in a manner which focuses on meeting the expectations of such customers.

Any plans to offer other funds in future?

Yes, we plan to launch several. The products that are on the drawing board include a fixed maturity plan and a gilt fund. We could even go in for some equity-oriented funds. But it will all depend on customer needs; we will not have any special bias towards debt or equity.

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