‘Equities may not outperform every year, but if they do so seven times out of 10, it’s an asset class worth relying on.’
Illustration: Dominic Xavier/Rediff
Though not among India’s top 15 asset managers, Canara Robeco Mutual Fund is focusing on building a durable, equity-driven business rather than chasing short-term assets under management (AUM) growth, Rajnish Narula, managing director and chief executive officer, tells Sundar Sethuraman/Business Standard.
Competition in the MF industry is intensifying. How does your fund house differentiate itself?
We have the highest equity concentration compared to the top 10 players.
Our strategy is built on a high-equity orientation — around 91 per cent of our AUM is in equities.
When markets move, that focus gives us higher sensitivity and potential for better returns.
Equities may not outperform every year, but if they do so seven times out of 10, it’s an asset class worth relying on.
To bridge the gap with larger peers, our best route is to build a disproportionate share of equity assets. It’s also a more stable foundation.
Fixed income, with its reliance on liquid and short-duration funds, can inflate AUM numbers but adds volatility and transience.
What’s driving your thrust on equity-oriented funds?
Initially, we were predominantly a fixed-income player — over 80 per cent of our AUM came from debt funds.
Our joint venture began in September 2007, just before the Lehman crisis, which gave us invaluable lessons.
Such events occur once every decade or two, but they underscore one fact — to avoid liquidity risks, you must have a meaningful presence in equities.
Equity provides that balance of relevance and resilience. Today, our equity market share is about 2.5 per cent, compared to our overall share of 1.5 per cent, which clearly reflects this conscious strategic shift.
IMAGE: Rajnish Narula.
Photograph: Kind courtesy Canara Robeco MF/Facebook
What regulatory changes have had the most impact on your business?
The shift from an upfront to a trail commission model under the revised total expense ratio regime was the most significant.
It fundamentally changed how the industry operates — aligning the interests of investors, distributors, and manufacturers, and creating a more level-playing field.
It also ensured that rewards were linked to duration and value creation, rather than instant gains.
Despite muted one-year returns, equity MF inflows remain strong. Could sustained weak markets impact flows?
The resilience of flows reflects the increasing maturity of Indian investors and the industry’s collective effort — through Association of Mutual Funds in India and individual asset management companies — to champion long-term investing.
The message has sunk in, and that’s what lends stability to MF flows even during challenging market phases.
Passive funds are gaining ground. Does that exert pressure on margins?
Mathematically, yes — passives are lower-fee products, and a higher share of them could compress average yields. But the AMC business has strong operating leverage — the same set of managers and systems can serve a much larger AUM base.
So, rather than focusing only on margins, we look at profitability metrics like profit after tax and cost-to-income ratios.
These are ultimately more meaningful indicators of business efficiency and sustainability.
Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products/investment products mentioned in this article to influence the opinion or behaviour of the investors/recipients.
Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.
Feature Presentation: Rajesh Alva/Rediff
