Mirae Asset Global Investments, Swarup Mohanty, AUM, SIP, thematic fund, ETFs
Mirae Asset Global Investments’s average assets under management (AUM) jumped more than seven times in the last three years—from roughly ₹4 trillion (April-June 2016) to about ₹29 trillion (April-June 2019)—making it one of the fastest growing fund houses and a favourite with investors. Its CEO Swarup Mohanty talks about the company’s good run, the Indian markets and more:
You’ve had a good run over the past couple of years. But there is something called mean reversion. What do you say to the argument that people investing in the fund house now are doing so after the party is over?
It is our endeavour to keep the consistency going. Knowingly, we will not deviate from our record. Also, as we have grown, we have become superior risk managers. That differentiates us. We only launch schemes in categories where we believe we can create significant alpha. We stick to our strengths and play to them. In Q1 FY2018, our performance was not great, but we bounced back from there. What you are saying can happen but we are extremely paranoid about losing consistency and we will keep that paranoia going. What’s in our control is adhering to our investment process.
In terms of valuations, where do Indian markets stand?
Large companies are positioned to become larger. Valuations, especially on the mid-cap side, look attractive now compared to two-three years ago. For a stock picker on the mid- and small-cap side, there is enough value. If you keep the risk parameters tight, it is a fantastic time to invest. We are at valuations that are close to 2012-13 levels for many stocks.
Systematic investment plans (SIPs) have been cited as the bedrock of mutual fund investing. What is the average size of an SIP you get and how long does it last?
Our average SIP is about 25% higher than the industry average, but an important point I want to highlight is that of our total folio count (more than 40%) is through the SIP route. This shows the trust investors have in us, and their willingness to invest with us for the long term. The proverbial SIP stoppage, as per market movement, has not happened with us. Almost 50% of the SIPs we get are in Mirae Emerging Bluechip. Retail penetration for us is growing dramatically. Online platforms have made investing easy. We get around 13% of our flows from such platforms, whether structured as registered investment advisers or mutual fund distributors. Out of the ₹100 we get, around ₹22 comes through direct plans.
You launched a healthcare fund almost a year ago. Most financial planners ask people to stay away from sector funds. Who should invest in this and why?
It is not a sector fund, it is a thematic fund. At the moment, pharma stocks occupy a large share in the fund due to valuations but in five to six years, it will be a diversified theme across healthcare. In the next decade, you will see more companies in the healthcare theme. The potential we saw at the time of its launch hasn’t gone away. The time horizon may be extended by a year, but the potential is immense in areas like pharma distribution, fitness and health insurance.
Has the time for switching to index funds and exchange-traded funds (ETFs) arrived?
There will come a time when alpha generation will become a challenge but that is still a few years away. The debate got overheated due to the recent large-cap underperformance against benchmarks over the past two years. As an asset manager, we look at the future and, hence, ETFs will be an essential part of our business. We are in the stage of launching basic and innovative ETFs, so we can create a track record for the future.
Consumer goods and auto are going through a slowdown. What sectors will drive India’s growth?
The comeback will be driven by financials as issues with non-banking finance companies (NBFCs) are getting resolved. There may be an issue with autos but it is more cyclical than structural. We don’t see consumption slowing down. Consumption trend in India is a long-term trend, and the current slowdown in consumer goods and auto is just a small speed bump. Also, we definitely feel healthcare is at attractive valuations, and we are using corrections to build more positions.
What is the single biggest measure the government can take to revive sentiments?
Transmission of interest rates is not happening. When loans are available at a decent price, private capex will pick up. Some of the policy changes were not warranted. Taxation issues, particularly on foreign portfolio investors (FPIs), did not go down well. What investors want is less disruption in government policies, including taxation, as it disturbs their planning process.
On the debt side, is the worst behind us?
We believe that market risks are temporary, while credit risks are permanent; so we don’t venture into the credit side. There is substantial scope for interest rates to correct from here. Also, investors don’t do asset allocation in debt. Why not have SIPs in debt? Let’s face it, retail banking in India was set up on recurring deposits. The principles of investing cannot be different for equity and debt but they are not applied in debt.
When you look at the longer end of the market, the issue with debt is the three-year taxation rule. India is the only country which is saying debt is long term and equity is short term from a tax point of view.