The Hindu Business Line : No upheavals likely in fund management — Mr T. P. Raman, Managing Director, Sundaram Mutual Fund

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No upheavals likely in fund management — Mr T. P. Raman, Managing Director, Sundaram Mutual Fund

Aarati Krishnan

With BNP Paribas deciding to shell out Rs 100 crore for a 49.9 per cent stake in Sundaram Asset Management Company, many feel that the fund house has secured an attractive valuation for its business. But Mr T. P. Raman, Managing Director of Sundaram Mutual, says that he is relieved at finding a good long-term partner for the business; price was only a secondary consideration for the deal. Taking a few questions from Business Line on what the rejig in management could mean for investors in Sundaram's funds, he points out that BNP Paribas could provide valuable inputs on designing new products and systems. He is confident that there would not be any upheavals in the existing fund management team or in investment strategies at Sundaram Mutual.

Excerpts from the interview:

How did you zero in on BNP Paribas as a suitable partner for Sundaram Finance in sponsoring the mutual fund?

We were approached by several mid-size players in the asset management and insurance business for a stake in the company.

The Sundaram group was keen that the partner should be willing to stay with us for the long term and should consider mutual funds as core to its business interests in India.

We were not too keen on taking on a partner whose main interests lay in life insurance. Nor were we keen on ceding stake to a behemoth, for whom the Indian operations would be a mere speck on the balance-sheet!

In this business, we have experienced first-hand the time it takes to re-build investor confidence after a partner decides to take the exit route.

Newton's exit was a trial by fire for us... People doubted our ability to manage the investments side of the business, on our own. But I must say we survived that very well.

We have established our equity funds and have actually grown our business three-fold since. BNP Paribas seemed an ideal fit, viewed from all these angles. They are a big name in this business and have a strong emerging markets presence; we liked their long-term approach to the business. Price was not the key criteria for the deal.

What will be the inputs from BNP Paribas to Sundaram Mutual's operations? Will new people be inducted into the management team?

Let me clarify that there is no intention to have a person on secondment from BNP Paribas in this company, because they feel that we already have a good team of people who are well-suited to run this operation.

Their key contribution to this company will come in the form of product development where they have several years of extensive experience.

Particularly, we are looking for help with structured products; by this I mean debt-oriented products with a derivatives component.

We are looking to tap investors in fixed deposits, who are now tentatively stepping into mutual funds.

What we have in mind are close-end plans with a 3-7 per cent derivative component; offering capital protection. Structured products could be ideally suited to the retail saver.

The second area where we expect inputs is in launching and managing offshore funds. You need a strong partner to run an offshore fund and BNP Paribas has a strong presence in the Gulf and good relationships with NRIs.

They are also present in most emerging markets such as Brazil, China, Korea and Turkey and have a fund of experience with launching products in these markets. That would be very valuable to us, here.

If we have a tie-up with somebody who has expertise in managing FII money; this would open the doors to funds from European, Japanese and other investors.

Right now, we have the capability to manage money, but not the access. We could also launch wealth and portfolio management services. BNP Paribas also has sophisticated, tested tools on risk control that we could use to strengthen operations.

The portfolios of your equity funds share certain special features. For instance, you hold a large number of stocks in each portfolio and take very diversified positions in stocks and sectors. Will your investment strategy change, with the introduction of a new partner?

On the existing products, we do not expect any changes. These have been tailored to Indian conditions and are working well. We have no intention of changing the style of managing our products. But going forward, we may customise some products that they offer and launch them in India.

We may advise their offshore funds; they can draw on our expertise to manage international funds. They will have a position on the Board and we look forward to some valuable inputs from them.

They have tremendous experience in other asset classes; so we may explore options such as a Gold Exchange Traded Fund and structured products that use derivatives.

Will you be going ahead with the new fund offers that you have in the pipeline?

Yes, we will. The launch of the Value Plus fund is on and we will be launching the Rural India fund at an opportune time.

Will the money raised by your sponsors from the stake sale be re-deployed in the asset management business?

Further capitalisation is a decision that we will have to take based on our business plans. That is independent of this deal.

We are capitalised at Rs 15 crore and if there is need for more money based on our business plans, it will be forthcoming from both the partners.

As of now, I see no need for the AMC to raise additional capital. But we will take a final decision on that after we integrate the operations and prepare a new business plan for the next financial year.

When will the deal be sewn up?

The formalities should be over within the next 2-3 months. We will be seeking FIPB and SEBI approval and do not anticipate any problems there. We will also be writing to unit-holders to inform them of this change.

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