Meet the Manager. Sell India at your own risk: Mirae Asset CEO

On an AUM (assets under management) to profits basis, we may be ranked among the best in the industry. The whole objective in these first 10 years had been to build a standalone, profitable, self-sustaining business in India. And we consciously took the equity AUM route because that’s where the margins are higher. This has helped build a good foundation for ourselves.

Today, the India business stands as a completely self-sustained unit from our promoter’s perspective. Thanks to this, we have now been able to start diversifying our business in India. We started ETFs (exchange-traded funds) last year to start the passive side of our story. We also entered the AIF (alternative investment fund) segment and launched a real-estate fund. Through the India private-equity arm, we have taken two stakes — one in a fintech logistics company in Bengaluru called Shadowfax, and the other in a co-living company called Zolostays. We recently also closed a three-year FMP (fixed maturity plan). The liquid fund is also growing well.

I am happy to state that last year, which was one of the toughest years for both equity- and debt-fund management, our businesses on both sides stood tall. We don’t carry any credit issues in any of our portfolios. It remains a cautious call. We actually wiped off all our (low-rated) credit papers by July-August last year because we felt that credit risk was increasing. That was a good call.

Yes, though there is often full portfolio disclosure, the underlying structure — the specific instruments being invested in — sometimes don’t come out clearly. Thankfully, for us, we have never invested in SPVs or any of those kind of structures.

Debt portfolios are not scrutinised the way equity portfolios are. But over the past year, more questions have been coming in, and there is improvement. It is interesting how the same investor behaves so differently with two asset classes. While the industry is transparent, the questions from investors also need to be deeper. If an investor notices an SPV in the portfolio, they should ask, and the fund should also disclose.

I think these players will also develop their own advising capabilities as they grow. Many of these platforms (including robo-advisors) — many of whom we work with — review their businesses and practices regularly and significantly. The distribution business will continue to evolve. There is room for everyone. Traditional and new distributors will both exist and continue playing a part in enhancing the market. I don’t think that one form of distribution has to die for the other to exist. Both will flourish and cater to different market segments.

Volatility is good for the investor. It is the investor’s best friend, more specifically the SIP investor’s best friend.

My advice to investors is to stay invested. Sell India at your own risk, I have been saying this for the last 10 years. Select a good fund and then leave it to the fund manager.

If your goal has been reached, exit. Find a purpose to your investing and a reason to why you are investing. Then, your investment process can be better; otherwise, you are aimless.

We have always believed in having only one product per category. So, we are almost done. We believe that we must launch a fund only if we can manage it. At Mirae, launching a fund completely lies with the fund management team. If they feel they have the strength to launch a particular fund, we will launch it. We are launching Mirae Asset Focused Fund on April 23. The fund has the flexibility to invest across market caps and sectors and at most in 30 companies. We believe this fund will help demonstrate a new investment style.

The fund’s exposure to large-caps, for a long period of time, has been around 75 per cent, and in excess of 80 per cent for the past three years. This has been in sync with its benchmark, the BSE 200 Index, where large-caps constitute about 85 per cent currently. In this context, the first and foremost point we would like to highlight to investors is that nothing changes after this classification as far as the current fund management style is concerned.

At the time of SEBI’s reclassification, we had kept the status quo with respect to the category, i.e., multi-cap, to give it more time. Subsequently, there were a few observations: (a) there was confusion among several external agencies because in a few places the fund used to get picked up under the large-cap category, and sometimes it used to get classified under multi-cap; (b) its AUM grew at a relatively fast pace from about ₹3,000 crore two years ago to more than 11,000 crore — thus, size was also one of the considerations, but not the main factor for the change.

Considering the above, we deemed it fit to move it to the large-cap category, given the primarily fact that portfolio changes are not required, and we are not diluting our endeavour to generate decent risk-adjusted returns. While reviewing this change, we also realised that the leeway to invest in mid-caps in a typical large-sized multi-cap fund is 25-28 per cent, vs. a large-cap, which is about 20 per cent. The important point is that the gap is only 5-10 per cent if we consider the current industry pattern. Just to re-iterate, the fund can still invest up to 20 per cent in mid-caps.

To summarise, this reclassification, in the long term, removes the ambiguity, makes the scheme more scalable, and, in our view, does not compromise on risk-adjusted returns as it does not result in portfolio changes.

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