Canara Robeco Asset Management Company Limited (CRAMC), the investment managers of Canara Robeco Mutual Fund is a joint venture between Canara Bank and Robeco of the Netherlands, which is a global asset management company that manages about $246 billion worldwide. The joint venture brings together Canara Bank’s experience in the Indian market and Robeco’s global expertise in asset management.
Canara Robeco Mutual Fund, one the oldest mutual funds in India was established in December 1987 as Canbank Mutual Fund. In 2007, Canara Bank partnered with Robeco and the mutual fund was renamed as Canara Robeco Mutual Fund. Since then, it has consistently been one of the fastest growing mutual funds in India in terms of AUM, having grown 160% from March 2009 to March 2013. Mohit Bhatia, Head Sales & Marketing, Canara Robeco Asset Management Company, spoke to BE’s Varsha Singh regarding the sector.
Q. How do you see the future of mutual funds in India?
A. The mutual fund industry is built on trust and increased confidence of investors. This confidence comes from the strong regulatory framework which is in place and a solid performance track record which has been instilled over a period of time. The industry in India has seen various phases during its journey of over two decades. The industry started with one or two fund houses but has now grown to over forty players, with a mix of domestic and foreign sponsors competing and offering customised products based on investors’ needs. The mutual fund industry has become more transparent and has come to manage assets worth over `19 lakh crore as of June 2017.
In the recent past, the mutual fund industry has seen more participation from non–metro and tier-II and III cities, which incline towards this untapped market. Initiatives by the industry and MF intermediaries have made the SIP (Systematic Investment Plan) route more popular among the general public, which shows simple and consistent communication has great merit. Greater use of technology has also helped the industry. Increased mobile and internet access has also helped. The future of the industry looks promising on the back of greater acceptance by retail investors, better returns prospects than most other investment avenues, ease of investing and deeper penetration into the hinterlands of the country. We expect the mutual fund industry to grow multifold in the time to come.
Q. What are the top sectors to invest in right now?
A. Global growth, at this stage looks to be at an inflection point and India is expected to be the fastest growing among the large economies. With a stable government at the centre and the implementation of various structural reforms, sectors with structural growth drivers (especially domestic economy linked) having low commodity-related or global-linked exposure are expected to do well in the near future. Our house view is that companies in sectors like private financials, consumer discretionary, auto, cement, and building materials and industries could be some of the sectors which may see increased investor interest and are expected to outperform others.
Q. Which type of mutual funds should one invest in and what advice would you give to people who are planning to invest?
A. Mutual funds offer various schemes and need to be selected based on the risk an investor is capable and willing to take (called risk appetite). Depending on the time horizon and risk appetite one can invest either into equity, debt, hybrid funds or a combination of all. Investment in equity funds has to be done with at least a three to five year investment horizon as the underlying equities are a volatile asset class. As mentioned earlier, equity markets in India are in a structural bull phase which means there are structural long-term reasons for equity markets to continue to do well over the long term. But in the short term there are likely to be ups and downs which can either scare investors or help them make good returns. Since one cannot know for sure what is the right level to enter or exit, investors are advised to continue investing through the SIP route and invest lump sums in each large decline. For those investing for their short term goal debts, hybrid funds are a better option. It is always a good idea to consult with your trusted financial advisor or mutual fund distributor.
Q. What should people look out for while investing in mutual funds?
A. Though direct investing in stocks might excite many investors, the risks associated with it are equally high. Investors who are looking for hassle free, cost effective and an efficient mode of investing may invest via mutual funds. The bottom line is that the investors need to match their risk and return the profile before investing in any fund, something an experienced financial consultant could help them with along with recommending/ monitoring the asset allocation that may help in achieving their financial goals. Having a longer term perspective and investment horizon is also important for investors seeking fulfilment of their wealth creation goals through MFs.
Q. What according to you are the risks and benefits involved with mutual funds?
A. Like most other market linked investments, mutual funds too have market risks related to their underlying holdings. Financial theory suggests that certain portions of risk can be reduced by diversification and that is where mutual funds score the most. There are five types of diversifications that mutual funds offer - asset class, sector, company, manager and time diversification. The last one is through the process of investing via the SIP route. Mutual funds are specialised investment vehicles which are meant to cater to the needs of most of the investors. However, most individual investors cannot afford to take positions in a number of individual securities due to the small size of their investment. Fortunately, they can take advantage of mutual funds which allow one to invest as low as `500. With investments done in mutual funds, investors with limited financial knowledge can get professional help to manage their funds. Mutual fund managers are professionally trained and experienced, constantly watching and managing their funds. Mutual fund schemes are fairly liquid and investments in schemes can be redeemed quickly. They also offer better post-tax returns.