In conversation with Feroze Azeez, Deputy CEO, Anand Rathi Wealth Ltd

For the next decade, retail participation in the form of systematic investment plans (SIPs) will continue to grow believes Feroze Azeez, Deputy CEO, Anand Rathi Wealth Ltd.

What is your outlook on the Indian mutual fund industry? 

The Indian mutual fund industry has done phenomenally well in the last decade. The AUM of the Indian MF industry has grown from Rs 6.82 trillion as of November 30, 2011, to Rs 37.34 trillion as of November 30, 2021, at a CAGR growth of 19 per cent, showing an increase of nearly five folds. The total number of accounts (or folios as per mutual fund parlance) as of November 30, 2021, stood at 11.70 crore (117 million), while the number of folios under Equity, Hybrid and Solution Oriented Schemes, wherein the maximum investment is from retail segment stood at about 9.52 crore (95.2 million). 

The platform also offers a better quality product mix - products across asset classes, market caps and themes. Equity oriented schemes comprise 48 per cent of the industry, debt oriented schemes comprise 26 per cent of the industry assets, ETFs market share is around 10.8 per cent while money market accounts for near about 15.4 per cent of industry assets. As far as the performance of the industry is concerned, if we look at the historical data of the actively managed diversified equity funds (excluding sectoral and thematic funds) in the past decade, then it could be seen that on an average near about 62 per cent of these schemes have outperformed Nifty 50. 

We expect the assets under management to continue the same growth momentum across market cycles for years and decades. The reason for this is, there is an avalanche of financialization happening in the Indian population. 

We at Anand Rathi have recognized this a decade back and hence our extensive focus has resulted in us becoming the largest mutual fund distributor (as per gross commissions earned other than Indian bank promoted entities and aggregators). 

For the next decade, retail participation in the form of systematic investment plans (SIPs) will continue to grow as it has been built on the foundation of investor education and the work done by the regulator and other stakeholders. The other thing which will come out in the next 10 years, as per our opinion, is that the Indian players – both on the asset management side and the distribution side will continue to grow at a faster pace. 

What are your plans to boost AUM growth amidst the increasing competition in the wealth management segment? What are your growth levers? 

AUM growth comes from four sources – One is the return on the current assets managed by a distributor. Since our equity mix is skewed towards equity, we expect 10-13 per cent growth on the existing assets. The second source is the existing 6900 client families consolidating with us as we built a relationship and credibility going forward. The third source is that new client families are gaining further momentum and these nine months of the financial year has been at a record pace. The fourth source is new relationship managers apart from the 253 we have as of Dec 31, 2021. We believe in training and building talent from within. We have 229 apprentices who are currently being trained by senior relationship managers for them to take up the role with time. 

What are the opportunities you are focusing on by furnishing value-added services to your clients? 

The value-added services which we currently provide are further being strengthened and delivered in the market place namely – estate planning, trust creation, real estate sale etc. These value-added services have displayed the power to make our current client relationships very strong and inter-generational. 

What is your take on SEBI’s recent consultation paper highlighting the increased risks surrounding algorithmic trading? 

We believe that the regulator has always been proactive in identifying potential risks very well in advance. Given the vision, we believe this action is also emulating the aspiration of protecting the fabric of the capital markets. This vigilant approach of the regulator has helped us sail through the highest degrees of volatility of the pandemic. 

What is your earnings outlook for the upcoming quarters? 

Since we manage the long-term assets of investors, we also look at our business growth over the longer term. We can grow AUMs and earnings at 20-25 per cent per annum across market cycles over the next decade. Our earnings over the next year should reflect this long-term trend growth rate. 

What are your top three strategic priorities? 

Our strategic priority from a client perspective is to align portfolios to the relevant design as per objectives of risk and return. This is a continuous priority to meet consistent client experience cutting across geographies and relationship management. 

Our second priority is to bring trail revenue 50 per cent of the total revenue. In the last year, in FY21 it was 34 per cent and in the quarter gone by, it has already reached 40 per cent. As of now 86 per cent of our total fixed cost is covered by the trail revenue income and the aspiration is to take it upwards of 100 per cent coverage. 

Our third priority is to penetrate the 3700 relationships acquired by using the research group of close to 55 people doing 20,000 meetings with client families this year.