The Hindu Business Line : Birla Sun Life Mutual plans expansion in retail space

Widening biz
Plans to add at least 50 more branches in the next one year
Proposes to come up with more fund offers across various asset classes
Looking to launch at least three equity funds this year

Chennai April 12 The mutual fund industry has to focus more on retail clients to expand further, said Mr Mukul K. Gupta, Chief Executive Officer, Birla Sun Life Mutual Fund.

He said that although the industry saw substantial growth over the past two years, most of the money came from the top 15 cities or so.

With at least 10-15 asset management companies looking to set up shop in India over the next 12-15 months, the industry would see increased competition with the new players also concentrating on the existing centres; hence, there is a need for players to expand geographically especially in the retail space, he said.

Bull run

Mr Gupta told Business Line that Indians who were earlier `savers' are becoming `investors' on the back of the bull run witnessed in the markets in the last three to four years. Fund houses need to avail themselves of this opportunity to reach out to them, he said.

Birla Sun Life Mutual Fund plans to expand its distribution reach to tap into the retail investor market. It has about 25 branches at present.

Mr Gupta said the fund house plans to add at least 50 more branches in the next 12 months. On the products side, it plans to come up with more fund offers across various asset classes.

It is looking to launch at least three equity funds this year, the first of them being the Birla Sun Life Long Term Advantage Fund (currently open for subscription). The fund house has also filed an application with the SEBI for a gold exchange traded fund.

Offshore funds

Birla Sun Life is also exploring the possibility of launching offshore funds with a feeder structure. Mr Gupta said such funds could possibly use the expertise of US-based MFS, owned by Sun Life, which has experience in emerging market funds.

The company would also promote its existing schemes. "Among our distinct funds, we will try to showcase 2 or 3 funds as our flagship schemes. The two which have been identified are Birla Sunlife Equity and Birla Midcap Fund," Mr Gupta said. Using the above strategies, the company aims to increase it assets under management over the next 12-15 months.

ULIP investments

When asked about why he thinks unit-linked insurance plans (ULIPs) have managed to garner a much larger investor base than mutual funds, Mr Gupta (who has prior experience in the insurance industry) said insurance companies have managed to create better geographical spread in the retail space over the past 5-6 years.

Some insurers derive almost 25-30 per cent of their business from B and C class cities. " Investors in B & C class cities who are willing to invest in the equity markets do not have proper investment vehicles such as mutual funds. They are hence using the ULIP route to invest in the equity markets," he said.

While fund houses have generally maintained that lower ticket size and high expense ratio have deterred them from going to B&C towns, Mr Gupta said funds have to make the investment now to derive benefits over the long term.

They have to strive to bring down their administrative costs. The insurance industry witnessed a similar scenario where there was increased competition and shrinking margins, he said.