Investors in the metros prefer equity schemes, while those in the eastern States prefer low-risk funds such as our Dual Advantage Fund, says Dinesh Kumar Khara, MD and CEO, SBI Mutual Fund, in an exclusive interview with BusinessLine . Edited Excerpts:

Given the stellar rally over the past year, are MF investors booking profits?

Yes, lot of them have. While the ultra HNIs and HNIs have a focussed strategy, retail investors have not had the patience. Retail investors who had been waiting since the 2008 crash have taken out some profits. But, some have come back also.

Are there any specific funds/themes that retail investors have exited?

The older tax-saver schemes which performed well in the recent rally have seen big redemptions across the industry. For instance, investors who had invested in our Magnum Tax Gain 93 Fund many years back have taken some money off the table. But many are investing back in other themes, particularly in large-cap funds and balanced funds.

It is believed that fund houses with a bank sponsor have huge distribution advantage. Is that true of SBI too?

State Bank of India has a strong distribution network of about 16,000 branches, but mutual fund is a very different product. And people who walk into a branch prefer products which offer guaranteed returns. But in a mutual fund, the regulator does not allow us to indicate a return. So mutual fund is hard to sell, we need to explain the product to customers.

The skill sets required to sell MF is different from other products that are sold through bank branches. The marketing talent available in the banking sector are not fully equipped.

Our internal analysis reveals that about 30 per cent of SBI’s branches can be leveraged to sell MFs. So, we plan to identify 300 branches in the first phase and promote MF products.

Are MFs largely bought by people in the metro cities?

There is lot of money and interest in equities even in non-metro locations, but the product awareness is missing. For instance, we see lot of potential in project locations of public sector companies, say NTPC or Coal India. So, these are the kind of places we are trying to reach out to showcase the product and solicit investment.

How is your customer base distributed?

We are equally distributed across the country. But when it comes to specific products, the response is different across markets. For instance, our dual advantage product is more popular in the eastern region — West Bengal, Orissa, etc, while equity schemes are predominantly preferred by investors in the metro locations.

SBI MF has three small- and mid-cap funds — Global, Small- and Mid-cap fund and Emerging Business. How different are they from each other?

Yes, all the three funds have the same benchmark, but the focus is slightly different. Global Fund for instance is a quality mid-cap fund, restricted to large mid-caps.

This is because, when we started this fund in the 90s mid-caps were not under focus. SBI Emerging Business started off as a theme fund, primarily to identify winning businesses. SBI Small- and Mid-cap fund which was acquired from Daiwa MF has a concentrated portfolio and is largely a small-cap fund.

But, the fund names do not clearly reflect the mandate. Do you plan to rename them?

We have taken cognisance of this, but to get the name changed we need SEBI’s approval and also have to give an exit option to existing investors. So, we shall think about it at the appropriate time.

What is the rationale behind your close-ended fund — Equity Opportunities?

We believe that with the new government at the Centre, investment will pick up in certain sectors. At the same time, the pay off will take at least three years. So, we want to play this through a close-ended equity fund. Also, because a close-ended fund gives more flexibility to the fund manager to stay invested in stocks which hold good potential over a three-year time frame.

But, there is no guarantee that the NAV will be higher than the par value at the end of the period?

When the scheme was devised we have decided on a NAV cut off, and should there be dearth of opportunities, the fund manager can invest in debt, money-market instruments so as to ensure reasonable return to investors at the end of the period.

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