‘We tend to gravitate towards a hybrid model'

K. Raghavendra Rao Sneha Padiyath Mumbai | Updated on June 21, 2011

Mr Piyush Surana, CEO, Daiwa Asset Management Company.

Part of an evolutionary process: Daiwa AMC

Very few CEOs in the mutual fund industry have worked in almost all functions of a fund house, and Mr Piyush Surana, CEO, Daiwa Asset Management Company, is one of them.

A chartered accountant, lawyer and financial planner rolled into one, coupled with two decades in this business, Mr Surana is the right man to talk on issues that impact a fund house in its nascent stage — something which he did with Business Line.

What are your expectations of the SEBI mutual fund committee that has been set up recently?

We look at any step taken towards the development and growth of the industry with hope and optimism.

The mutual fund business in India has become extremely competitive with margins of asset management companies shrinking considerably over the last five years.

In fact, the viability of the business for players who do not have deep pockets is today under question.

This business has the potential to provide the masses a useful investment avenue along with the benefits of diversification.

What kind of product mix will enable you to grow given the fact that most niches are already occupied and you have to start from the scratch in India?

Currently we have four products and plan to launch two more in the next quarter. We are building out a standard product suite and will try and build strong performance track records in these products over time.

We intend to intersperse these with differentiated product offerings.

An AMC in India today has three choices — do sophisticated products for a limited high-end clientele, be a niche player and occupy mind space in a particular segment or do simple products for a larger universe of investors.

We tend to gravitate towards a hybrid model considering the competitive environment in which we exist.

This is part of an evolutionary process of this industry and will continue for some years.

What is the choice of your distribution network that would keep tabs on cost and ensure maximum reach?

An unaffiliated asset management firm does not have too much of a choice in terms of distribution channels today.

The large national distributors and the Independent Financial Advisors (IFA) are the distributors of choice. Among them, we choose our partners from the subset willing to sell our products based on our credentials.

One has to understand that a distributor deserves more respect as he is going out there to sell your product, which is at this juncture an unknown commodity, and hence it is his credibility at stake.

Trust and relationships have become critical today. Several distributors have also created online platforms that could prove cost efficient.

Attrition within the industry has started picking up. What are you doing to retain and recruit employees?

A healthy work culture, empowerment at appropriate levels along with reasonably competitive compensation has thus far helped us in keeping attrition under check.

Being a stable Japanese organisation is one of our virtues in today's business conditions but I do think that retention of people will become more of a challenge a couple of years down the line.

A new AMC has to resort to a certain degree of experimentation in terms of organisational structure, role fitment and the like to be able to find and retain appropriate talent and we have tried to do a bit of that.

What kind of socio-economic class are you targeting given the fact that mutual fund houses work on shoe-string marketing budgets?

On the retail side, our potential end customer comes from middle-class Indian households.

In this industry, marketing budgets tend to be shoe-string because of the business margins, and so, when and how to use your resources is a key decision. We believe that marketing spend would be of better leverage in the future than now.

Published on June 21, 2011

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