Mutual Funds

‘Never unduly worried about short-term performance’, says Chandresh Kumar Nigam of Axis AMC

Kumar Shankar Roy BL Research Bureau | Updated on May 16, 2021

The fund-house wants to scale up presence in passive strategies

Ever since launching the first scheme in October 2009, Axis Mutual Fund has solidified its position in the MF industry and today has average assets under management of ₹2 lakh crore.

Chandresh Kumar Nigam, MD & CEO, Axis AMC, says the last five years for the company has been a journey of going from being “credible” to being “relevant” in the industry. As long as an idea can add value to investors over the long term, says Nigam, the fund-house will be happy to consider adding it in the product basket, which has of late expanded to include passive and global investing schemes.

Excerpts from an exclusive interview where Nigam talks about importance of B-30 (beyond the top 30 or T-30 locations), performance of schemes, fixed income strategy, and investment philosophy.

Take us through the journey of Axis MF over the past five years. How have you adopted the digital way of doing things?

The last five years for us has been a journey to go from being “credible” to being “relevant” in the industry. We had used our first few years since our set-up to demonstrate our differentiated investment philosophy, which had been well-received and appreciated by the market, and to build out the core product basket. The last few years have seen us getting rewarded for walking the path and it has been a great ride that has seen us achieving leadership position in a number of areas, including equity, SIPs and fintechs.

As a result, even as industry growth has moderated from 18 per cent per annum . over the last 10 years to 13.5 per cent over the last three years, we have continued to grow strongly and have broadly doubled our overall market share in the last five years.

We have used technology in a significant manner in all our functions and that is reflected in our ability to operate seamlessly over the last year. We have also updated our digital assets significantly and have a clear aspiration of providing a seamless journey and experience to our partners.

How does T30-B30 client profile play out for the AMC? Also, how big is the Axis MF SIP book?

Broadly, our B-30 mix is aligned with the industry. I think in today’s market, we can no longer make assumptions on quality or understanding of investors based on their location. Technology has really levelled the playing field. Also, the industry has done great work in terms of penetrating and reaching out to the smaller locations and in terms of carrying out investor education campaigns. At Axis, we have always had a large retail book, and our numbers on B-30 reflect that as well.

SIP is a simple and yet one of the most powerful tool available to retail investors to achieve their long term goals and pushing SIPs has been a very conscious part of our strategy and it gives us great pride that we are one of the industry leaders in that space as a result of our work over the last few years.

Even a couple of years back, Axis MF had the top-performing schemes across all equity fund categories, beating benchmarks and respective category by a mile. But some feel the picture today is different. Your take?

We know that short-term performance can be volatile based on liquidity, sentiment etc., and as such we have never unduly worried about short-term performance numbers. Our objective with coming up with a well-defined philosophy was that we should remain focused on delivering long term — what we call sustainable —performance; and which also factors in risk taken in the portfolio.

In that context, we have been very happy with how our long-term performance has panned out and the trust that investors have shown in us. I would like to believe that our process targets generating long-term alpha in the Indian market and we are confident that our long-term performance numbers may continue to reflect that.

You still don’t have a pure value-oriented equity fund even after a decade of doing business. Why is this so?

Our philosophy is that ultimately growth in earnings is what translates into returns for equity investors. And quality companies are those that can grow their earnings on a sustainable basis over the long term. Accordingly, our active products all follow this approach where we look for good quality stocks that can generate long-term earnings growth.

Having said that, we have launched a number of passive products that allow investors to take up alternate exposures and we recognise that as a large asset manager we have to cater to different investor needs. Ultimately, as long as an idea can add value to investors over the long term, we will be happy to consider adding it in our product basket.

What is your fund-house’s vision for passive investing and how does it blend in with actively managed schemes?

From Axis’ perspective, it is a natural evolution of our product basket. Once our core active strategies were in place, we added products in two broad areas — passive and global investing. This reflects our approach that investors should get choice in style as well as investment universe in order to be able to create a strong portfolio.

Even from an industry perspective we have seen passive products really getting popular and the passive AUM has crossed ₹3 lakh crore. In that sense, passive investing is an idea whose time has come.

Passive strategies are an important tool for investors and we see them as an essential part of a fund management bouquet. While we are quite small in this space currently we want to scale up our presence meaningfully, going forward. We are looking to offer differentiated products and we have taken big steps towards improving our basket with launches of sector ETFs and debt ETFs.

On the fixed income side, debt funds and their holdings have been under the scanner ever since the FT episode. Amongst peers, Axis has come out of this relatively unscathed. How did you manage this?

As I described earlier, we have always thought very carefully about our investment approach. And one of the critical parts of our strategy has been looking at risk and return in conjunction. Credit risk management is a great example of where focusing on return without looking at risk can really hurt. From our perspective important risk management protocols such as quality check, position sizing, looking at duration adjusted spreads were all a part of a comprehensive approach we used while evaluating credit allocations in our debt funds and I’m really pleased that it has helped us navigate the tough environment in the last couple of years.

New skin-in-the-game rules for MF industry have been announced. How do you think will this impact the industry? Are investors' interests better served with more SITG?

I think we need to acknowledge that the MF industry has added tremendous value to our investors over the last 25-30 years. Yes, there can be unfortunate issues in individual funds but it should not take away from that overall fact. Sebi’s attempt is to get greater alignment in interests between the fund manager and investor and while we can understand the rationale for that, I think it’s too early to comment on how this will impact the industry.

Published on May 16, 2021

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