“Technology is the new game-changer in the finance industry”
With a new breed of young investors entering the financial markets, it is the use of technology that is increasingly playing a major role in how investments are done and tracked. Anand Radhakrishnan, Managing Director, Sundaram Mutual Fund, shares his opinion about how this factor is turning into a significant tool and how it will shape the strategies of his company
In your new role, what are the key priorities and strategic initiatives that you would like to implement?
Some of the key priorities include:
- To deliver more consistent investment outcomes for our unit holders across various fund categories in equity, hybrid and fixed-income products.
- To improve the quality of customer experience with us through our communications, knowledge partnership, technology interfaces, etc.
- To continue to ensure we are in full compliance with the existing regulations.
- To build our mutual fund brand with a strong emphasis on the core values that Sundaram Finance Group stands for.
With the current market landscape presenting both opportunities and challenges, how have you positioned your funds to capitalise on these trends?
While some of our funds have changed portfolios in line with changing opportunities, some are still a work in progress. As the economy becomes more balanced between various vectors of growth, namely, consumption, investment, government expenditure and net exports, we need to better understand them from a medium-term perspective and possibly better align ourselves. That said, the investment team is aware of these opportunities and is making its best efforts to ensure that our fund positioning remains in sync with the current landscape of opportunities.
Can you provide insights into new fund offerings that Sundaram Mutual Fund is anticipating in the near future?
We recently did a ‘business cycle fund’ to leverage three to four emerging key themes in the Indian economy. We think combining a few themes with business cycles offers an interesting choice to investors. We aim to launch some products in categories like value, smart beta and international markets (as and when allowed) in the future. There are some blank spaces in our fixed-income product offerings too and we hope to fill them over time.
Technology and digital transformation are reshaping the financial industry. What are your plans for leveraging technology to enhance investor experience and operational efficiency?
Technology is playing a deep and vital role in the way the mutual fund industry is functioning and evolving. We are very keen to leverage this in our internal functions – investments, compliance and human resource management as well as our external interfaces like sales, marketing, branding, customer service, etc. We are reinvesting our profits in digitally transforming our organisation, making it more contemporary and real-time. This transformation will take some time, but once done, we think that our stakeholders (distributors and investors) will find the Sundaram Mutual Fund experience second to none. We are also building an internal analytics layer over key areas like investment and sales, and are gradually making it available to our employees with the view to help them make faster and more efficient decisions.
We have seen cases of front-running in mutual funds. As an industry expert, what advice would you give to prevent such incidents and restore investor confidence in the industry?
Compliance failures pose a clear and present danger to every organisation and the mutual fund industry too is vulnerable to this risk. The MF industry has come a long way in terms of delivering consistent performance and transparency to investors and is possibly the best among many alternative financial products. That said, having rigorous internal compliance processes, risk monitoring and management, surveillance mechanisms, etc. are becoming more and more important to prevent the occurrence of any type of fraud.
Technology has to be leveraged effectively to identify and act swiftly in case of breaches. In short, technology is the new game-changer in the finance industry. Most importantly, employees need to be continuously educated on the importance of compliance and the risk of losing investor trust in case of advertent or inadvertent failures. The culture of compliance needs to permeate the length and breadth of an organisation, and everyone needs to be aligned with the unit holders’ interests. While investing is all about making maximum profits, for a fund house, it is about securing and retaining the trust of its customers.
Are there any specific sectors or themes that you are particularly bullish on for the coming years?
We remain structurally positive on dominant themes in the market such as manufacturing, digitisation, premiumisation, urbanisation and sustainability. We think these are medium to long-term trends that will continue to remain very relevant for investors. There are pockets of exuberance and overvaluation in these themes which may lead to short-term corrections, but fundamentally they have strong tailwinds and will keep providing interesting investment opportunities. An increasing number of people with disposable incomes are now in the process of evolving their lifestyle and this will lead to certain sectors doing very well.
Some sectors such as cement and construction too look attractive due to strong housing demand and the government’s thrust on infrastructure development across the country as well as the programme of creating smart cities. Pricing in the cement sector had deflated in real terms suppressing the sector’s profitability. However, at some point in the future, this may change leading to improvements in return on capital employed (ROCE) and profit growth. With more houses getting built, the demand for construction materials too will remain robust and one can take calculated risks there.
Could you share your perspective on the importance of investor education and the initiatives you are taking to enhance financial literacy?
The industry has done a stellar job of educating investors and the Association of Mutual Funds in India (AMFI) has enormously helped in the investor education journey over the last decade. Today, MFs have become a household name despite low penetration, and many people are aware of the different kinds of products and their risk profile. But some people still make sub-optimal investment decisions by using the wrong decision parameters and we need to continue our efforts to help them make better decisions. We are seeing an influx of young investors every year who have access to the internet and other social media platforms.
We need to leverage technology more to help deliver educative content in shorter forms to grab the attention span of the next generation of investors. For example, most of the young investors who would like to park their surplus funds to generate wealth over a short-term or long-term period use their mobile phones to carry out the transactions. To this extent, Sundaram Mutual Fund has started taking initiatives to modernise our education material, the medium, frequency and duration to get a better mind share and efficacy of delivery.
Lastly, what will be your advice to investors who want to invest in a lump sum in the current bull market scenario?
Investment is a marathon but is also embedded with a series of short sprints. Currently, we are going through one such sprint phase and investors need to be acutely aware of this situation. I would personally recommend that a lump sum amount should be directed to hybrid and asset allocation funds, especially in the dynamic category of balanced advantage funds, which give portfolio managers the flexibility to change allocations in response to market conditions. This may give them a good risk-adjusted return over time.
Disclaimer: The opinions expressed above are personal and may not reflect the views of Dalal Street Investment Journal.