Vinay M. Tonse, MD and CEO at SBI Mutual Fund, is a veteran SBI banker. He was posted as CEO of SBIs Osaka branch in Japan from 2009 to 2013. In previous assignments with the bank, he oversaw treasury, focusing on equities and mutual funds, giving him a chance to evaluate mutual funds from an investors point of view. He then managed large corporate relationships for SBI. His last posting was in Chennai in retail banking before taking over the helm of SBI Mutual Fund in August 2020. Tonse spoke to Mint about his views on the mutual fund industry and the path ahead for SBI Mutual Fund. Edited excerpts:Interest rates have been reduced throughout the past years to stimulate the economy, but this has hurt savers and the retired folk. Do mutual funds offer any alternatives?
Yes. We feel this is one of the reasons for our existence. In the last few years, Indias GDP growth has come in below potential rate, which was ascribed partially to high real interest rates, among others. Interest rates have hence been progressively reduced. In 2014-15, the repo rate was 8%; today, it is exactly half that number. This has stimulated the economy, but savers got hurt. SBI was offering 10.5% on longer-term fixed deposits in 2009; that too has halved now. Low real rate of interest on bank deposits is a compelling reason for savers to explore alternative investment options like mutual funds. Equity markets offer inflation-adjusted returns that take care of future needs. The CAGR (compound annual growth rate) of the Nifty in the last 10 years would be above 10%. In terms of taxation benefits too, mutual funds are better placed than fixed deposits.
Leaving aside March 2021 figures, equity schemes witnessed continuous outflows after June 2020 alongside record openings of demat accounts for stock investing. How do you evaluate the year gone by for the industry as a whole?
If you look at it, since March 2020, markets almost doubled by February 2021. When an investor is not very sure of the future, he or she will book profits as the market rises. This is a very natural thing. It shows maturity on part of the investors. As far as direct equity goes, many of the investors putting money in direct stocks are new. In my own family, youngsters have become stock investors and apps have made this easy for them. Work from home has also helped this phenomenon. I am not very worried about mutual fund flows. But I only pray that whoever has entered the market without much knowledge does not get hit badly.
SBI MF became the largest fund house in India in 2020 after rapid growth in the past 3-4 years. To what extent is this driven by institutional money? What does future growth look like?
In the past five-six years, we have grown at 35-36% CAGR. That is simply amazing. The share of our AUM (assets under management) from institutions is broadly in line with the industry at around 52%. But we are strong on the retail side too with a broad-based distribution network of IFAs, distributors and banks, which help us reach millions of savers.
The SBI name evokes a great deal of trust. We also want to go beyond the top 30 citiesfrom India to Bharat and tap the next level of growth.
Do the timelines for the disposal of Franklin Templeton assets look uncertain due to the second covid wave?
Not really. Im confident that with our kind of scale and breadth, we shall be able to complete the maximum liquidation sooner than later. Apart from whatever cash was already sitting in the schemes, we were left with about 16,000-17,000 crore of assets and our guess was that around half of this will be liquidated within two-three months. I think we are still within that timeline. We arent going into this in a hurry because we want to provide optimum value to investors. We are quite satisfied with the liquidation happening daily. The second wave will not have any adverse effects on this.
After several months of unlocking, the second wave has hit India, but the market has not reacted. What do you think accounts for this paradox? How can ordinary investors navigate it?
The first wave came out of the blue for India and the rest of the world. There were no medical protocols. If you look at what the markets like or do not like, they dont like uncertainty. As uncertainties went away, markets rallied. In the second wave, we do not have as strict a lockdown. Medical protocols are in place. The government and RBI will step in if there is panic in the market, such as liquidity infusion. There is more certainty now. Common investors should not bother about short-term volatility. They should have long-term horizons and invest through SIPs. Investor education should inculcate this among investors. Asset allocation is another important strategy. Not all assets go down at once.
Is the mindset of retail mutual fund investors changing towards longer-term, solution-oriented or goal-based investing or does it continue to be ad hoc trigger-led and driven by sentiments?
We are seeing a shift towards solution-oriented schemes such as childrens benefit plans, which will take care of studies, or retirement funds to take care of later years. Im often asked about retirement funds when I meet investors. Of course, any mutual fund can be used for retirement, but this type of labelled solution imprints the goal in the minds of investors.
What is the place of passive funds in an investors portfolio, both on the equity and debt side?
Passive funds have become popular across the globe and in India as well. These are good for investors who just want to mirror their returns with that of various indexes. Active funds have a fair probability to generate alpha but behavioural biases also come into play. As far as the passive category in debt funds is concerned, it is at a very nascent stage in India, but this category will also grow.
Are there particular segments where active works better than passive or vice versa?
In our kind of economy, which is still developing at a faster pace, there is a very fair probability of playing the bottom-up strategy and creating handsome alpha through active funds.
However, there is a strong base of investors specially Foreign Portfolio Investors (FPIs) and institutional segments who want to participate in the growth story of the country rather than taking a call on individual stocks. This set of investors will allocate in passive funds. So, both strategies will go hand in hand
How is the fund house shaping up after the departure of Navneet Munot as CIO in January?
Navneet was with SBI MF for more than a decade and was part of the senior fund management team. With Navneet moving out, R. Srinivasan and Rajeev Radhakrishnan have taken up the mantle as CIO equity and CIO fixed income, respectively.
Their vintage with us is almost in similar years and they have an enviable expertise and rich experience. As a fund house, we always believed in a process-driven approach and this actually ensured a very smooth transition. With our kind of AUM, we in any case wanted to have separate CIOs for focused attention separately for equities and debt. The same has been put in place without any change in the fund management policy.
neil.b@livemint.com
Click here to read the Mint ePaperMint is now on Telegram. Join Mint channel in your Telegram and stay updated with the latest business news.
