Three years ago, when Milind decided to launch the first HDFC Debt Fund for Cancer Cure to coincide with his fund house's 10th anniversary, we carried an article with his interview which we titled "What an idea, Sirji!" (Click Here). In these 3 years, the fund has donated Rs. 10.87 crores which have given hope to over 500 cancer patients who simply could not have afforded this cure, but for the investor's support. But what's truly noteworthy is that the fund house does not see its role as only financing a cause : it is deeply involved in the entire process with the Indian Cancer Society, from tying up with hospitals across the country, doing an exhaustive due diligence of applications for support and ensuring that needy patients don't lose hope only for want of money. And leading this effort is Milind himself, who religiously participates every fortnight in these committee meetings, ensuring that he puts hope into the hearts of despairing cancer patients.

With the launch of the second edition of HDFC Debt Fund for Cancer Cure, Milind is going one step further. In the first edition, his fund house waived all management fees and expenses. In this edition, he's not only doing the same, but has additionally decided that the AMC will match the contributions made by the Unit holders, in equal measure. That means that the more they collect in this scheme, the more will be the donation generated by the scheme, and consequently, his AMC's contribution will increase likewise. This is one outflow from the AMC that the normally tight-fisted Milind will happily undertake! His earnest request to every distributor in the country : please source at least 1 application for this fund and help him and his team put hope in the hearts of thousands of needy cancer patients. Wealth Forum salutes this fantastic effort - hats off to you Sirji!

WF: You launched the first edition of the HDFC Debt Fund for Cancer Cure in Feb 2011, to commemorate the 10th anniversary of your fund house. How much money did you collect in it? More importantly, how much did it earn and contribute towards the noble cause that it set out to help?

Milind Barve: To put the context of the fund, we were amongst many financial intermediaries that Indian Cancer Society connected with and presented us with the challenges they faced in providing financial help to poor people for cancer treatment. The first thing we understood is that in any philanthropic work, an NGO requires certainty of money being available to create a proper program. Typically a lot of NGOs do good work but they are based on a hand to mouth strategy, raising donations and then spending it appropriately. But what they need is the predictability of income so that they can create a structured program. We thought this could be done through a mutual fund product.

Essentially we wanted to do something in philanthropy and we found our business, as a fund manager, most appropriate, because I think we are blessed that our business has customers who are people who have money to invest. Our expertise as an Asset Management Company is to manage money and our expertise is also in the distribution of financial products. So we thought we needed to convert that distribution and the asset management capability for a philanthropic cause. And we basically married this desire to what the Indian Cancer Society wanted.

We felt it appropriate to create a three-year closed ended fund as a solution. In this fund, we buy into high quality debt paper, and at the end of three years, the principal is fully returned to the investor. This we are about to achieve as we have come to the end of the first fund. The philanthropy comes from the fact that when the investors invest in this fund, they sign off that the income they would earn by way of dividends would be donated to the Indian Cancer Society. There is an option to donate either 100% of the dividend or 50% of the dividend. The first fund raised about Rs. 80 crores in the close ended fund. Each year it created a donation of about Rs. 4.3 crores to the Indian Cancer Society. At the end of December 31, 2013 it generated Rs.10.87 crores of donations to the Indian Cancer society.

The donation is one part of the effort. But, we are much more deeply involved in this philanthropic effort. We have signed an MOU with the Indian Cancer Society. There is a rigorous process of approving applications for financial help. Indian Cancer Society has tied up with 7-8 cancer specialty hospitals all over the country, apart from Tata Memorial Hospital in Mumbai from where they receive applications. There is a strong process of due diligence done by a team of oncologists and social workers (DDT) and there is a further due diligence done by a team called the Governing Advisory Council (GAC) that is headed by Mrs. Usha Thorat, ex-Dy Governor, RBI. The DDT evaluates if the applicant is getting the correct type of treatment and the cost that he is incurring is appropriate given the nature of the disease. This entire process is conducted for every application that we finance.

This money is used for helping people with family income less than Rs. 1,00,000 per annum to pay for the treatment. It is mainly for the very poor section of the society. We sanction up to Rs. 4,00,000 per patient, which is by and large adequate for the treatment. We cannot save all but at least we have given hope to more than 500 people. As a part of the program we do follow up phone calls to people who have got the money to find out if the money helped with the treatment/recovery process of the patient and how the patient feels and we get some heart rendering responses about how the money has helped.

The other thing about this product is that we do not charge any cost to the fund. There is no investment management fee. Whatever the scheme has earned, and in this case it has been over 9%, gets distributed as donation based on either 100% or 50% through the investor. Apart from that HDFC AMC has put Rs. 5 crores into this fund and HDFC Limited, our sponsor has also put Rs. 5 crores into the fund with the 100% donation option. So we are investors of the fund, managers of the fund and distributors of the fund.

I am a member of the GAC. I personally attend two meetings a month just to see how this process works. I am closely involved in this process and am very happy to spare the time for this effort. We have a very good team supporting this whole cause. The oncologists help us to understand each case and how to treat it though beyond a point it is very medical.

People invest with us as they have trust. They know that HDFC MF is doing this activity with Indian Cancer Society and it will be put to use properly and promote a good cause. We do our best to ensure we do justice to the trust reposed in us.

WF: What prompts you to do an encore now?

Milind Barve: This fund is the first fund where the principal will be returned around 10th of March. We have seen strong visible impact of this program and are encouraged by this. So we are doing another fund having very similar features. But we are going a step ahead. Whatever donation amount the fund generates per year for the Indian Cancer Society, HDFC AMC will donate a matching amount based on how much we collect finally. So whatever investors' money goes as donation into the fund, HDFC AMC will make a matching donation. So the impact is higher. The number of patients it reaches will get doubled.

WF: What kind of a collection number in this fund will make you happy? If you put your philanthropic hat on, you would want a big number, but if you put your CEO hat on, the bigger the number, the more is the outflow from your AMC!

Milind Barve: I want to maximize the money that goes into the donation. I will want to raise at least as much money as we did last time and try to increase it. We should at least reach Rs. 80 crores-Rs. 100 crores. The fact that we have to make a matching donation does not limit our effort. We will be happy to see the maximum collection.

WF: AMFI has now been given the responsibility of setting up the MF distribution SRO. How do you see fund distribution evolving in the next 3 years under the new framework of an SRO on the one hand and the Investment Advisor Regulations on the other hand?

Milind Barve: I don't think the SRO is going to be a subsidiary of AMFI. I think AMFI has been only tasked to set it up and it will then be funded on its own. My understanding is that AMFI is not going to be responsible for running of the SRO, as an SRO by nature of its function needs to be independent of any body. So AMFI has been tasked to set it up but once the job of setting up is done, the SRO will be independent. It will be a completely autonomous body. The regulations require 9 directors and out of which 5 will be independent directors and the others would be the representatives of the industry both from distribution and asset management. It has a regulatory function and so I don't think asset management companies or AMFI can influence it apart from having a representative on the board.

The job of a SRO is to regulate and not to make new regulations. I do not think it will be a policy making body but will be an implementing body. It may make regulations, which will comply with the existing set of regulations that are there for distributors. So my understanding is that there will be a standalone entity which may work under SEBI whose job will be implementation of regulations and how they should be interpreted and regulated in a manner that helps the industry and at the same time puts in place the responsibility of the distributor to the customer and to the manufacturer.

I think there will be more accurate crystallization of what a distributor should and should not do. It will also define relationship of the distributor with the customer and manufacturer clearly. I don't think any distributor should view setting up of the SRO as a concern. Its objective will be to curb mis-selling and ensure right selling of products. Distributors with right policies and strategies should not be worried about the new SRO. It is going to be positive as if there is any grey area, there will be an independent agency that can give clarification and the entire distribution community will have a platform where their views can be addressed and there can be adequate response to something which is specific to distribution as the main objective of SRO is to regulate distributors. The SRO will of course ensure that the interest of investors is always protected. So in that sense it will be focusing on addressing distributors issues with investors' interest in mind. The role of SEBI as an overall market regulator will not get diluted.

WF: A leading fund expert has recently stated that he expects the individual distributor (IFA) to soon be "a thing of the past". What is your outlook on the IFA channel and what will be the key drivers of this distribution channel, going forward?

Milind Barve: I am a firm believer that if any model of distribution will survive time, it will be the IFA model. In fact we have seen other distributors sometimes being active and sometimes not, based on other products they sell. There might be some IFAs who might have gone out of business probably because they did not have adequate scale or were not adding sufficient value to investors. There may have been a degree of consolidation amongst IFA or IFA business towards people who are adding some value other than those just peddling application forms. But there is data to prove that in the last one year, some of the concerns of direct plans impact have actually proved not relevant to IFAs because only the institutional, money market and corporate business have chosen the direct route where the commissions earned by the intermediaries were reasonably small. The retail business, which is the bread and butter and the soul of the IFA business, has seen almost no change.

So I would look upon the last one-year data as an indication that retail investors still need the services of a distributor or an IFA and that is something which they will continue to need. Unfortunately if you look at the statistics in a different way, this is the year where the retail business has not grown though the institutional business has grown. So if you compare AUM in a year where institutional business has grown and in which the direct plan has gone up, then obviously the data will be skewed. This is the year in which we are saying that retail business has been less and it will pick up in the future. We really need to believe so but of the retail participation that continues to come to us, looking at gross sales numbers, there has been virtually no shift to the direct plan. So in a way it is strongly indicating that the direct plan business hardly has any meaningful impact of people shifting away from distributors as I think that people need hand holding on asset allocation and on choice of products.

WF: Before we conclude, what is your expectation from the distribution fraternity for the NFO?

Milind: I have a sincere appeal to every distributor, every IFA, every employee of a distribution house in the country: we have reduced the minimum application amount from Rs.1 lakh to Rs. 50,000 in this edition. Please make an effort to source at least 1 application each for this fund - help us to put hope in thousands of despairing hearts. All I am asking each one of you is source at least 1 application.

WF : Milind, the work that you and your team are doing in helping cancer patients see hope beyond cancer is truly phenomenal. I am sure the distribution community will enthusiastically support this new fund, and strengthen your resolve to widen the reach of this very noble effort and touch many more lives across the country.

DISCLAIMER: The views expressed Mr. Milind Barve, Managing Director of HDFC Asset Management Company Limited (HDFC AMC), constitutes the author's views as on February 24, 2014. The views are based on internal data, publicly available information and other sources believed to be reliable. Any calculations made are approximations, meant as guidelines only, which you must confirm before relying on them. The information given is for general purposes only. Past performance may or may not be sustained in future. The replies are given in summary form and do not purport to be complete. The views / information provided do not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this information. The information/ data herein alone are not sufficient and should not be used for the development or implementation of an investment strategy. The statements contained herein are based on our current views and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Neither HDFC AMC and HDFC Mutual Fund nor any person connected with them, accepts any liability arising from the use of this document. The recipient(s) before acting on any information herein should make his/her/their own investigation and seek appropriate professional advice and shall alone be fully responsible / liable for any decision taken on the basis of information contained herein.

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