It's been a difficult year for Tata MF as the fund house saw a decline in equity assets of over R900 crore in FY13 compared to the year-ago period. Arvind Sethi,managing director & CEO of Tata Asset Management,admits as much,but says the fund house's schemes have not performed all that badly compared with their respective benchmarks. In an interview with Ashley Coutinho,Sethi says one of the important tasks before the fund house is to communicate this fact to its distribution partners and investors. Excerpts: The equity market has been volatile and the mutual fund industry has been seeing consistent outflows in equity schemes. How worrying is this trend? There are several misconceptions about mutual funds. For example,there is a misconception that you put your money in mutual funds to make a 'high' return. That is clearly a simplistic view. Of course,people place money in mutual funds to earn a return on their savings but they do this by allocating their money to an asset class. Mutual funds is the best vehicle for investing in equities. But if the asset class does not perform over five years,then other than outperforming the benchmark,what is a fund house expected to do? However,debt funds have given a 12% plus return over the past two years,and mutual funds were the best way for an investor to capture that. Therefore,understanding one's financial goals and the asset classes that can help fulfill them is the key to investing. How has FY13 been for you as a fund house? It has been a difficult year for us. We were not able to capture our share of flows. Besides,with 44 players in the market,the industry is facing hyper competition and margins are under pressure. The industry is also adapting to several changes that have been initiated by the regulator over the past 2-3 years,but we now look to the future with a high degree of renewed commitment to build a long-term business to serve the needs of investors. You took over the post of CEO a few months ago. You have also recently appointed a new CIO and new sales head. What are your plans for Tata MF for FY14? Our goal is to be simply the most trusted manager of money in the country. A superior risk-adjusted return or consistent performance is central to our objective. Ritesh (Jain),our CIO,has an excellent track record in managing debt funds and overseeing both debt and equity funds. We are fortunate to have a deep pool of talent and you will notice those results. Our performance in debt funds is already being noticed by the market and equity will follow. The second task before us is to communicate how our funds are performing. We have been inconsistent on that front and the challenge is to engage effectively with our distribution partners and convey to them the message that our fund performance is in fact not all that bad. Of the total schemes managed by Tata MF,65% of them have outperformed the benchmark over a three-year period and 69% of them have outperformed over a five-year period ending March 31,2013. Tata MF has slipped from being Indias seventh largest fund house in 2005 in terms of assets under management (AUM) to 11th position now. What steps are being taken to revive the fortunes of the fund house? The main reason for the decline in our AUM seems to be that we did not manage the post-2008 decline in markets as well as some of our competitors. When equity markets fall,all equity funds fall and it is not that our funds did worse than those of others. We have funds which have an excellent long-term track record. However,we were not as aggressive in explaining the performance and investment strategy to investors as we should have been. Investors and advisors understand risk but they are less forgiving to those who do not hold their hand when times are difficult. That may have created a negative perception in the minds of investors and I guess perception is reality. The fact that we had a large proportion of AUM in infrastructure funds may have made things worse. Another factor which may have contributed to our decline was that we were not as agile and entrepreneurial as other fund houses. So,our plan is to go back to basics in everything we do - managing funds,how we engage with our distributor partners,our engagement with investors and with our own people. The Tata name is among the most trusted names in the country and we are working hard to rebuild the connection with all our stakeholders.
