The Hindu Business Line : ‘Govt is keen to have a more vibrant debt market’

There is reason for investors to look at fixed-income funds more closely, reasons Mr S. Shahabuddin, MD & CEO, SBI Mutual Fund. “Short-term options have significant appeal. But there may be more to fixed-income investing than just these”, he says in an interview with Business Line.

Excerpts.

For longer term debt products, the much-discussed turnaround has not happened. How do you view this?

This may be a bit too early to suggest that such a turnaround will take place right at this moment. Let us just say that equities have seen a major rise, prompting some quarters to book profits, a part of which may be allocated to debt as a prudent asset allocation strategy.

While short-term funds are indeed quite popular, it is clear that certain sections may soon start looking a little beyond them. Here, we are referring to corporate investors too, those who have been restricting themselves to such things as liquid funds and fixed maturity plans. However, we are not suggesting that there will soon be drastic changes in investors’ preference.

Don’t debt fund managers feel restricted by a paucity of good paper?

Right, the number of high-quality securities seems to have gone down in general. But a range of superior issuers, including some of the quasi-government institutions, does exist. We aim to add the choicest securities in our funds’ portfolios. There is not much trading in the bond market, a state of affairs that should correct, at least partially, in the days ahead.

The Government is keen to have a more vibrant debt market in this country. Several moves have been taken in the recent past to ensure that the dynamics here start changing.

How much of your sale is on account of SBI’s own network?

Roughly 30 per cent of the inflows into our NFOs comes by way of what is mobilised by SBI’s branches. If you consider the overall scenario, about 15 per cent of our AUM (assets under management) is on account of the bank’s network.

Mind you, we are talking about a mammoth organisation, comprising several thousand branches that make up the SBI group. The latter in fact together form a critical part of our total asset base.

Any new offers?

We have filed, inter alia, an offer document for a tax-saving fund. This will be the first in its series.

The tax-saving fund that we already have has grown a little too large.

We would like to keep its size at about Rs 3,000 crore. However, there is no question of putting a moratorium on fresh inflows into it.

We hope to have a set of new investors in the proposed fund.

On another front, we have also proposed to have an international product. A number of other players have offered international funds already. The demand for such products is increasing in this country. Let me add here that we have not been great believers in NFOs in the sense that constantly there has to be one new offer after another. Doing an NFO involves considerable expenditure.

Can we expect your partner SocGen to play a more active role?

SBI MF may be in a position to offer a fund that will be sold abroad by SocGen. However, nothing concrete has happened so far. We have been eying various possibilities. The JV partner, which holds over 30 per cent, has provided a range of critical inputs.

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