When Anoop Bhaskar joined UTI Asset Management Co. Ltd, the fourth largest fund house in the country, in April 2007 as the head of its equity funds, it was a tricky period. Having streamlined its processes after the US-64 crisis, consistent performance of its equity funds across board was still an issue. Apart from an occasional topper, the fund house wasn’t really known for its performance. Known more for his mid-cap picks during his previous stints (as the former fund manager of Sundaram Mid-Cap Fund—a mid-cap-oriented scheme that rose to great heights under him), Bhaskar himself came with a bit of baggage. It’s said that it took him over a year to get adjusted to the size and scale of the fund house—a period during which he stayed away from the media. Today, at 43, Bhaskar seems to be in control of his team and 29 equity schemes, seven of which he directly manages.
UTI Asset Management Co. Ltd has been headless for over six months now and that isn’t good news. Is that affecting your work?
Over the last four years, during the tenor of U.K. Sinha, daily interference in investment decision making had been negligible. There was a periodic review of the investment performance and full autonomy was given to individual fund managers for their portfolios. The same has continued since February and our performance speaks for itself. As a disciplined investment team, we have shown significant improvement in performance.
Anoop Bhaskar, head (equity), UTI Asset Management Co. Ltd. Photo: Mint
We don’t get to hear enough of your well performing schemes because they get hidden behind a large bouquet of UTI schemes.
That is an issue of perception because we have not been able to project our performances in a better fashion to our distributors—and thereon to investors—so maybe we are lagging there. But having a large bouquet is natural; other large fund houses, including Birla Sun Life Asset Management and Reliance Capital Asset Management Co. Ltd, have it too. Our peers (size-wise) may have about 15 schemes; we’d be having 21-22 because of our legacy and the way the fund house was structured.
Also, till about three-four years ago, new fund offers (NFOs) were an integral part of our sales effort, so we had more thematic and more topical funds than others. A strength for us at that time, it is now seen as our weakness, so that is a challenge we face. Our aim is to make our funds as broad-based as possible.
For example, UTI Dividend Yield Fund ought to get compared with a large-cap-oriented fund, say, HDFC Top 200; they have more stocks in common than other dividend yield funds as such. If we are able to transpose that positioning and the fund leaves its dividend yield lineage and is looked at like a fund which invests 75% in large-caps and the rest in mid-caps, then the category of investors it can attract can increase significantly. We want to communicate more like that in the next 12-18 months. Similarly, some (other) funds (of ours) are very narrowly defined. So despite their narrow definitions, they are on a par with any other truly diversified equity fund if you look at the kind of scrips they manage.
What about other funds launched in the NFO boom period?
We will take appropriate action. Remember, becoming a large fund house with less number of schemes is no panacea for good performance. It has also serious issues of developing and retaining talent on the fund management side. Our industry is conspicuous by its abilities of hiring laterally rather than build internally-generated teams. We tend to hire fund managers from outside rather than picking up graduate students from, say, business schools and then grooming them. That was one of the clearest lacunae.
As a result, if I have only four schemes with four fund managers and at least 10 research analysts who look at 15-18 sectors, what career path can I offer them? Here’s where thematic or narrowly defined funds play a role; we assign junior fund managers to them so that they manage a fund belonging to a sector that is close to their research work. These fund managers can be, therefore, groomed to become tomorrow’s stars. At UTI, we encourage this belief.
Nurturing your team by taking in people’s money and increasing the count of your offerings may not convince your investors.
As long as we are able to do our job well, give a hygiene portfolio and above-average returns, I think we are there. Over a period of time, some of these funds will get merged, but by and large, it doesn’t make sense to convert some of these sectoral or thematic funds, such as an energy sector fund, into broader themes, such as a diversified equity fund. So we have to wait and see when these themes will play out; it could take 18 months to two-three years. Hopefully, the investor knows their narrowness and then wants to see them play out.
Also, the markets move in cycles. Between 2005 and 2007, investors wanted concentrated and narrow portfolios. When they burnt their fingers in 2008, they moved to diversified portfolios. This cycle will run its course and some time ahead, the new cycle will start, which could again be concentrated portfolios. There’s nothing right or wrong about it.
UTI AMC has social cause schemes that solicit money from charitable trusts, a children’s fund and a retirement fund. Why haven’t you marketed these enough? Insurance companies aggressively market their children plans.
Let us talk about UTI Children’s Career Plan (CCP). This has a 40% equity allocation. The insurance company’s CCP invests 100% in equities. Most investors look at returns. A scheme with a 40% equity allocation is a dead duck in a rising market versus one that comes with a 100% equity allocation.
We also can’t offer high brokerages to distributors compared with the insurance companies. Even after a drop in their commissions, it’s a commercial and structural challenge.
Where do you see the market going in the next three-five years?
Our studies show that whenever future earnings expectations fall below 14% and price-to-earnings multiple levels hover around the last 10 years’ average, (equity) investors have outperformed the fixed-income category over a period exceeding two years. Today, we are at those levels. Despite the mountain of “negative” news, domestic or global, valuations are at a benign level. Yes, they may become more compelling if the sentiment turns more negative, but then catching the bottom is a mythical exercise which has been successfully practised either by liars or really lucky individuals. Our message is simple, the current level offers an attractive entry point for investors who are investing with a time horizon of two years or more.
Many infrastructure funds have invested in the banking sector. Do you think the banking industry comes under the purview of the infrastructure sector?
Apparently that was the smartest thing to do. But I think it’s a complicated issue; we too are grappling with the issue. There is no right or wrong answer. Infrastructure’s definition is open for interpretation.
You have got to see a bank’s lending profile. For example, HDFC Bank Ltd per se should not qualify as having infrastructure exposure because it lends largely for two-wheelers and cars. Companies such as IDFC, Power Finance Corp. and to some extent HDFC Ltd can qualify because of their lending profile. Similarly, banks like IndusInd Bank Ltd won’t.
Our investment committee has said that we must invest in the core infrastructure sector for at least 75% of the fund’s corpus. For the rest 25%, the fund manager has a leeway because we are playing a relative game with a peer group that follows its own policies.
So that 25% can include HDFC Bank and IndusInd Bank?
Yes, that 25% can. We have to accept that ultimately as far as an outsider’s expectation is concerned, returns come before purity of style unfortunately.