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The slew of financial services companies entering the mutual fund business will not have major impact on established players and new entrants cost advantage will fade over time.
A Balasubramanian, Managing Director, Aditya Birla SunLife Asset Management Company, said there will not be any big change due to entry of these new fund houses as there will be no product differentiation.
However, there will be some improvement in on-boarding of customers and market expansion that will also benefit established players with long track of delivering better returns to investors.
Once the asset under management of smaller players grow, they will have their own challenges and cost advantage will also vanish, he said.
“With the continuous focus on getting more business per employee and scale of operations, our cost will also be much competitive despite having physical presence in most districts,” he added.
SIP contribution
Despite touching an all-time in asset under management both in equity and debt, the SIP contribution is still lagging at ₹700-800 crore a month against ₹900 crore logged pre-Covid, he said.
“Investors who had paused their SIP during the Covid pandemic are slowly restarting their investments and our endeavour is to take the SIP book to a new high,” he added.
The buoyancy in the market will remain because the liquidity is high and global regulators have expressed their intention to withdraw liquidity in calibrated manner without impacting the growth. While the growth drivers may take some time to fructify, the reform process will continue to boost investment and keep the level of optimism high, he said.
After touching a new high, there will definitely be a consolidation as the quarterly results are announced but the fact that other competing asset classes have not revived from Covid impact should favour equity investment, said Balasubramanian.
Sectoral rotation
Asked why mutual funds have not booked profit at higher levels, Balasubramanian said the money managers are largely focused on sectoral rotation to derive better returns for investors in the long run. For instance, the telecom sector had underperformed in last few months but the reforms by the government has suddenly changed its fortunes. Similarly, real estate has gained confidence and there are always pockets of sectors which are undervalued to throw investment opportunities, he said.
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