‘MF space has room for 100 more, if there are differentiated players’

The mutual fund (MF) industry has grown manifold over the past decade, but the number of players has shrunk, says AASHISH SOMAIYAA, chief executive officer of White Oak Capital, which has recently forayed into the MF space by acquiring YES MF. In an interview with Chirag Madia, Somaiyaa says that White Oak will look to launch diversified equity funds first. Edited excerpts:

Several new players are foraying into the MF space. Do you think there is scope for everyone to grow?

In the last 10 years, the assets under management (AUM) has risen over four times and in the last five years alone the number of unique investors, SIPS (systematic investment plans), and folio counts have multiplied 3-5 times. In this entire phase, the number of players in the industry has shrunk. So, I find it odd when someone asks me if there is space for more players. If we are going to add performance, differentiated perspectives to investing, diversity in product range, ease of access and great service to our investors, then there is space for a 100 more. It’s a question of what each player has to contribute.

What was the rationale behind acquiring YES MF?

YES AMC is an up and running organisation, which has put systems and processes and a good team in place. We intend to integrate it with White Oak group and build by augmenting it further and providing more resources and significantly enhancing the product bouquet. Having an organisation in place can make the process quicker but I would say that in any form or format acceptable under Indian regulations, White Oak Group would have either way made an MF foray because that is the ideal format to service retail investors. We will build a full-service AMC with over 100 locations across the country in the next 12-24 months and an omni-channel presence serving distributors and investors.

What will the growth strategy be?

What differentiates White Oak is our unique manufacturing background. Several new entrants are specialists in distribution, yet others have a strong digital/fintech background. While having a strong distribution or a technological background is no doubt a critical success factor, what sets us apart is that we already have a strong track-record of investment management and performance. White Oak Group manages in excess of ~40,000 crore of assets invested in India by global investors.

What kind of products will you be looking to launch?

To start with, our focus is going to be on actively-managed equity funds. We will look to launch diversified equity funds first, which is closest to our style of management because we are sector-agnostic and market-cap agnostic. As a result, our first approach would be to create domestic equity funds with a multi-cap, flexi-cap, large-, and midcap, mixed market capitalisation kind of strategies. Also, White Oak’s investment team has several professionals, with considerable experience in managing international equity assets. So, over time, we may also want to leverage this expertise in the team and look at some emerging market products. YES AMC already has some fixed income offerings, so we will eventually look to build on those fixed income offerings as well. Sequentially, it should be domestic equity, global equity and then hybrid, multi-asset and fixed income.

Equity funds have seen record inflows in the last few months. Do you think this trend will continue even if there is a market correction?

The last couple of years have shown the domestic investors have by and large become resilient and there is now a critical mass of seasoned investors with multi-cycle experience of witnessing equity markets. You will see redemptions from time to time as investors have a wider range of options to switch within the large boutique of offerings from MFS. But these are just short-term trends.

There has been significant regulatory tightening for the MF industry in the recent past. Do you see them as headwinds or tailwinds?

I do not see them as headwinds and industry growth has shown that they are not headwinds. Standardisation of products and practices makes it easier for investors to understand and access. While it has curtailed investment latitude and commercial latitude by a small margin that does result in scope for alternative products. I see nothing wrong with that because MFS are mass retail vehicles and complexity of any sort is best handled outside the MF arena for sophisticated investors.