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WF: Congratulations on breaking into the Top 5 club! What in your opinion helped you achieve this important milestone in a competitive market place?
Dinesh Khara: Thank you. As far as the contributing factors are concerned, the first and foremost is the focused effort on the part of our investment team, to ensure that they remain consistent in terms of beating the benchmark and also sticking to the templates. That is something which has really helped us in delivering healthy performance across our fund range, even in challenging market conditions.
The second is a disciplined approach on the part of our marketing force as well. Our team created a matrix, looked at market shares in each territory and worked on plans to enhance share in each one. This focus enabled us to reach out to as many distributors and investors as possible.
WF: What is the road ahead for SBI MF now that you have made it into the Top 5 club? What can we expect from SBI MF in the coming 3 years?
Dinesh Khara: Our endeavor will be to first consolidate our position at number 5 and going forward improve our market share as much as possible, across all product categories and distribution channels.
I personally feel that there is a huge opportunity which lies in this country for taking the mutual funds to unexplored, unchartered territories. Our biggest efforts will go towards increasing the penetration of mutual funds across the country - to reach the farthest ends of our country.
Our efforts will also be very focused on technology solutions - particularly those that can be conveniently leveraged by distributors to boost their productivity and help them connect with many more investors. We want to enable our distributors to widen their reach significantly, because that is going to be key for the industry to expand its footprint.
WF: What in your view are the big trends that will significantly impact the MF business in the next 5 years? How should distributors align themselves to leverage these trends? Many IFAs believe that one of the key trends going forward is dis-intermediation.
Dinesh Khara: Let me first talk about a couple of trends, and then the dis-intermediation issue in that context.
When we look around us in the country, for most products and services, digital is rapidly becoming the default option - not just an added facility. We have to recognize that this will happen in the mutual funds space as well. Steps that simplify customer onboarding like e-KYC and bank KYC will only accelerate this trend. Everyone in this business - whether we are fund houses or distributors need to ask ourselves whether we are equipping ourselves to offer digital solutions as our default option.
Second trend I see is a growing segregation of commoditized products and solutions and complex products and solutions. I always like to draw an analogy of the pharmaceutical industry. There are a range of OTC products for simple ailments and there are prescription products for more complex ailments that require the diagnosis and prescription from a qualified doctor.
In our business also, we will see OTC solutions as well as advice oriented solutions. OTC solutions can increasingly migrate towards direct, while advice oriented solutions should always be driven by advisors based on their diagnosis of investors' needs, circumstances and risk appetite. Products that carry significant market risk are complex, they need to be properly understood, and risk appetite needs to be properly assessed. Low market risk products may not require that level of rigour in suitability testing, and can become OTC products.
The pharmaceutical industry relies on consumer pull for OTC products and works with doctors for its prescription products. Distributors and advisors will always remain relevant for solutions that require prescriptions - long term financial plans, retirement solutions and so on. Just as there is role clarity between pharma companies, pharmacies and doctors, our business will eventually settle down the same way over time.
WF: There is a keen regulatory desire to see a very limited set of simple products being communicated simply in the market place. Some believe simplicity will drive market penetration, others believe it will breed commoditization of the business, which in the long run is not good for the investor as it stifles innovation. What is your view on this debate?
Dinesh Khara: Like I mentioned, one part of our business is going to get commoditized in terms of basic features - just like so many OTC medicines in the market. Simplicity will certainly help drive market penetration, which is a major goal for the industry.
At the same time, I do believe that products that require heightened investment management skills, those that carry higher market risks, are not likely to get commoditized, due to the inherent complexity of the products themselves.
WF: You and Navneet have often attributed your commendable equity performance to discipline in sticking with fund mandates and executing well established processes. Other leading AMCs who like you, are winning market share in equity, share a similar view. Is alpha generation now becoming more a function of processes and discipline rather than fund manager flair?
Dinesh Khara: I think beyond the processes, what really works very well for us is the culture we have built within our investment team. This is a knowledge business, and every team member must be respected for the knowledge and skills he or she possesses. A culture where there is mutual respect for ideas and insights, without any considerations to organizational hierarchy, is one that brings out the best in every individual, which ultimately contributes towards superior fund performance. I think our investment team has developed this kind of a culture, which to my mind is a big contributor to consistent investment performance.
WF: What is your message to your distribution partners as you look towards consolidating your position within the Top 5 club?
Dinesh Khara: I want to first thank our distribution partners for supporting us so well in our journey. Our growth is their growth. In our success is their success. We look forward for their continued patronage. Our industry can grow only with the active participation of our distribution partners. I do understand that there are concerns within the distribution fraternity about their business models. I want to assure them that we are here to work with them in strengthening their business models to enable them to continue growing successfully. I firmly believe, like I have already mentioned that our industry will eventually settle down in a way that offers space and clarity for every model to grow successfully. We all need to work together to take mutual funds much beyond where we have been able to take them so far.
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