WF: You have rich experience across the financial services industry, before taking over as the CEO of Principal's Indian MF business a few months ago. What are your initial impressions of the MF industry? What are some of the aspects that strike you as significant strengths of the industry and what aspects seem to keep it from growing to the scale many of us believe it ought to?
Lalit: Yes I have a long and a very gratifying association with the financial services industry going back to early 90's. Specifically the last two decades have been very exciting for the financial services industry as a whole and for me personally the industry offered exciting business and professional opportunities.
Ever since moving to Principal Pnb AMC in October, 2014, I've had several interactions with various stakeholders in the business; including the customers, intermediaries, business partners, industry peers and the regulators. The most impressionable observation I have from these interactions is the amazing pace of change and evolution of the industry and high resilience and adaptability of the players and the eco-system. Though a relatively young industry with majority of the private sector players entering the industry after mid 1990's, the industry has evolved quite fast. Though the total asset under management as a % of GDP is still in single digits. However keeping in mind our deep rooted cultural biases for investments in bank deposits, real estate and gold the growth of the mutual funds AUM to about $ 200 Billion at compounded growth of 22.5% over the last 10 years is a big positive for the industry. I believe that the industry is passing through another transformational phase. On one side there have been number of regulatory developments essentially keeping in mind the best interest of the investors at the same time the India story and macro-economic presents a compelling proposition for growth of India's Capital market and also the MF industry. While the savvy HNI investors would continue to participate in capital market through the mutual fund platform I believe the key to sustained growth is increase in financial literacy level amongst retail investors and expansion of distribution network to smaller cities. Clearly technology is likely to be a significant growth enabler, consequently several AMC's and distribution houses are taking actions towards e-enabling their distribution platforms.
WF: What do you see as Principal MF's key strengths that you wish to leverage going forward? What are some aspects of your business which you think need to be strengthened?
Lalit: Our lineage is our big strength. Principal is a fortune 500 company with over 135 year experience in asset protection and asset management business. And Our JV partner Punjab National Bank with over 6,000 branches provides us a great distribution platform and access to a large potential customer base. I believe that the quality of our management, commitment of our people, our work environment and passion to do it the right way is our big strength. Of course there are several aspects that we can be better in but none that we are not cognizant of and do not have plans to address in due course. Our plans for the next 3-5 years is to consolidate our position as a dominant player in long term asset accumulation and asset management business. Besides developing new solutions to meet needs of the investors through our domestic funds, we will also aggressively pursue bringing in unique global investment options from our international product suite for our clients.
WF: You have inducted senior talent to head sales & distribution. Is this a part of an overall plan to strengthen distribution?
Lalit: Yes strengthening of sales and distribution platform is a key focus area for the company. Our goal is to build long term strategic alliances with key distribution houses at central as well at nodal levels. Besides inducting new talent across the sales organization at the head office and branch levels we have also rejigged the sales organization structure for sharper focus on customer and distributor engagement. We are delighted to have Karan Singh join us in April 2015 to head the National Sales and the AMC marketing function. In a short time Karan has been with us we are already seeing a positive uptick in our business as well as our distribution footprint.
WF: Equity performance across your fund range has bounced back very smartly over the last couple of years. What has driven this performance turnaround and what are you doing to ensure that the team maintains its momentum?
Lalit: We believe that the improvement in performance which is more visible over the last 2-3 years will sustain over long periods of time. Our belief comes from several elements of investment philosophies enumerated below that our investment team follows:
Focus on three core strategies across our funds viz. Large-Cap, Diversified and Mid-Cap with a dedicated Fund Manager for each strategy to ensure even sharper focus on portfolio construction and performance
Remain largely invested in the market with a long term view, without any aggressive cash calls. Despite all the headline news being negative especially in 2012 and 2013, we used it as an opportunity to identify stocks with strong growth opportunities
Focus on bottom-up stock picking is an important and integral part of our strategy and is a significant creator of portfolio alpha. The endeavor is to identify companies which could outperform peers and the market by virtue of their strong business outlook, build a reasonable portfolio position and stay invested till the story plays out
Ensuring all portfolios are true-to-label and within defined risk control parameters in terms of sector/stock concentration, liquidity, threshold market capitalization. This should provide our investors the comfort that, they can relate our products to their own risk profiles and remain confident that, we will honor their mandate.
WF: What should your distribution partners expect from Principal MF, with a new business team at the helm?
Lalit: We believe in building long term relationships with our business partners. Besides fair and competitive compensation structure our distribution partners can expect high level of engagement and high quality of service from Principal MF. We will continue leveraging technology to make it easy for our partners to interact and do business with us and partnering with the distribution communities to further investor awareness in new underserved geographies.
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