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Business News/ Money / Calculators/  We don’t plan to be at this scale and profitability forever
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We don’t plan to be at this scale and profitability forever

Vikaas Sachdeva of Edelweiss AMC says that for the industry to grow each MF needs to find a niche

S. Kumar/MintPremium
S. Kumar/Mint

Vikaas Sachdeva, chief executive officer, Edelweiss Asset Management Ltd, has roughly 18 years of experience in developing and marketing financial products. He elaborates on how the focus on performance and clear client segments are the driving force at Edelweiss AMC. He also thinks that there is room for more fund houses, but for the industry itself to grow each fund house needs to find a niche and focus on a differentiation strategy.

The fund house has been around for about six years. What strengths have you built?

Any company (asset management company, or AMC) that was formed around 2008-09 has gone through catharsis. Markets have been unkind. Also, we realized a long time ago that what works for the large sized asset managers may not work for us. So, we took this time to become proactive in engaging with distributors and at the same time, focusing on performance and rationalizing costs.

Performance might suffer in the short-term but needs to be consistently good over the long term. We have also worked a lot on our communication with distributors because it’s important that they understand every product well. There is no point in trying to second-guess the market; if you build your performance and communicate well, when things turn, you will stand to gain.

The third thing we have done is keep costs under control. Along the way, we have also trained people and focused on a niche customer base and products. We needed a differentiated strategy and our value proposition was to help distributors get high net worth investors (HNI) in equity or full-fee products.

This helped because in the intervening period, when markets weren’t supportive, it was better to focus on a particular segment rather than spreading across the board. We also focused on equity and started categorizing our assets under management (AUM) on the basis of fees and measured all funds in terms of equity. For example, 100 units of liquid AUM is, say, one unit of equity. While overall assets reduced, the proportion of equity AUM went up.

We asked distributors for help in understanding which products make sense and which don’t, and improve communication. Products that we thought were brilliant, didn’t go down well with distributors because they could not simplify and communicate those well enough. Instead we found they wanted simple products. In the past three months, our market share in net sales has consistently increased.

In terms of unique products, we haven’t seen anything after the Absolute Return Fund.

We are focusing on conventional funds to build a track record. The Absolute Return Fund is like our calling card. It works on volatility control. It was an alien concept when we launched and it took us a lot of time to convince distributors. The average ticket size for this fund is now around 4.5 lakh, which corresponds to the HNI segment. Now people have started asking us to showcase other products.

In terms of new products, we realized that for unique ideas we may not have the distribution strength to get the minimum AUM in the product as mandated. So, we have launched some such products within our Portfolio Management Service umbrella. Now we might have the requisite pull and are filing for new products. These may or may not be on the conventional MF platform.

You have products with very small AUMs as well. How do you manage those in terms of costs?

We wait for the right time. For example, our Edelweiss Diversified Growth Equity fund’s AUM moved from 8-9 crore to around 30 crore in a year. Similarly, every fund will require a push at the right time. Creating a track record is important. We will look at ramping up AUMs across the board.

Do you plan to expand to investors in smaller towns?

Right now we have six branches. Our focus is on HNIs, and the bulk of this category is in the larger cities. We are testing waters in smaller towns as well but we will do a proof of concept. We have to make sure that there are clients there before setting up branches. Our modus operandi is to work with wealth managers and private bankers with access to HNIs. In smaller towns we are testing waters with independent financial advisers.

Are you open to taking over another AMC?

We have a clear long-term plan. We don’t intend being at these levels of scale and profitability forever. If there is an opportunity, we are open to it. We have scanned the industry, but as of now don’t find anything at the right price. If there is an opportunity at the right price and fits into our objectives, then why not?

Do you think the industry should consolidate?

If you (AMC) keep playing in the same MF space, it will grow at its own space. We need to look beyond. There is a huge market that has still not been tapped with differentiated products. There is room for many more firms; what’s missing is clear strategy. In some cases, investors buy products because of trust, returns and a product pull. Today, most AMCs are known by their best selling product rather than the brand, which, was the case earlier. If you don’t have the positioning right as a company, you will suffer. Apart from a few, there is no clear positioning of products and AMCs, and so, no clear answer to why investors buy certain funds. If the majority of the industry does not have a focus, then the industry itself will find it difficult to grow.

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Published: 21 May 2014, 06:35 PM IST
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