‘Bear market not a worry for MFS’

SBI Mutual Fund’s ascent to ~10 trillion in assets under management (AUM) is buoyed by the post-covid rally in the equity market and bolstering of its distribution channels, says DP SINGH, deputy managing director and joint CEO, SBI Mutual Fund. In an interview with Abhishek Kumar in Mumbai, Singh says the AUM can touch

~20 trillion over the next five years if the market remains supportive. Edited excerpts:

What are the key drivers behind the ~10 trillion AUM milestone?

Over the years, we have worked to enhance our reach and increase the systematic investment plan (SIP) book size. The efforts have borne fruit. The monthly SIP inflow has more than doubled in the past few years to ~3,200 crore. The SBI brand, timely product launches, a strong reliable team, and the distribution network have also contributed to our growth. Not to forget the post- Covid bull market that has been a growth catalyst for us and the industry.

As our AUM is the largest, the gains from the market movement are also higher compared to other players.

Is the burgeoning size a hindrance in equity fund management?

Considering that not all schemes can always be in the top quartile, the performance has been good. As far as the fund size is concerned, it makes a difference. For an equity scheme, once the size goes past ~50,000-60,000 crore, the ability to put more money in existing stocks gets limited. You have to look for more stocks but that is also not the best thing to do as you end up having a long tail (several stocks with small allocations).

Flexicap and ELSS funds are similar in structure, but they have delivered divergent performances in your case at 27 per cent and 55 per cent in the past year. Is it a planned move to manage funds with different styles?

I won't say it is planned. When funds are managed by different people, the performance is bound to vary. Given that an ELSS is a closed-ended unlike flexicap funds, the fund management approach has to be different. In flexicap funds, fund managers have to be prepared for redemptions.

However, the diversity in fund management style does make sense, especially for a fund house like us as most of our investors put in money in more than one fund. It helps reduce the portfolio overlap.

The post-covid bull run has been the key growth driver for the MF industry. Does it worry you that a bear market phase can undo the progress?

Going by the recent trends, especially regarding SIP, investors seem to have matured in a big way. Markets have seen a lean phase for a few months and even a year in recent times, but the SIPS have continued. They understand the compounding and cost-averaging benefits of investing for the long term through SIPS.

Have you set an AUM target in the coming years?

Today, we are at ~10 trillion in MFS. At the AMC level, which includes MFS, PMS, AIFS, and offshore funds, the AUM is ~24 trillion. The MF AUM can double in the next five years with a stable government and other factors, which continue to support the market. Our focus will be on creating robust digital tools and delivering strong fund performance while continuing to reach out to new investors.

MARKETS HAVE SEEN FEW LEAN PHASES IN RECENT TIMES, BUT THE SIPS HAVE CONTINUED. THEY (INVESTORS) UNDERSTAND THE COMPOUNDING AND COST-AVERAGING BENEFITS OF INVESTING FOR THE LONG TERM THROUGH SIPS”