“Our focus is on making sure that we continue with a great performance”

Ajit Menon
CEO, PGIM India MF

The most important, if not only, factor of success for an asset manager is in having a consistent good performance track record for its investment platform. In this interview, Ajit Menon, CEO, PGIM India MF, highlights the ways of doing so

It has been after almost eight months that we have witnessed inflows into equity mutual funds. Is it due to the new NAV rule applicability enforced from February 2021 or are investors genuinely returning towards equity MFs?

It is unlikely that the phenomenon is due to any new rule. The trend of redemptions and net negative flows has been reducing for over a quarter and it was only a matter of time before the trend naturally extended to positive flows given no other major external risk factor. SIPs have been growing too. Having said that, we don’t think that we can keep projecting forward based on the data so far since this is a difficult time around the world, and particularly in India. The anxiety due to the second wave could lead investors to be more cautious and conservative. This would reflect in their allocation as is natural.

Your equity funds seem to be overweight on the financial and technology sector. Which sectors according to you will be leaders for the future rallies in the equity market?

PGIM MF as a fund house looks for long-term themes which could play out in the Indian economy and aligns portfolios to these themes. We believe the themes which have a long runway to evolve as India moves towards a developed economy are consumption, finance, digitization and healthcare. At any point of time either one or a combination of a few or all the themes will participate in the market to reflect the growth opportunities they present in the Indian economy.

PGIM India Mid-Cap Opportunities Fund is one of the best performers in its category. What led to such an outstanding performance?

The mid-cap fund along with all our other funds have focused on operating cash flows (OCFs) and clean balance-sheets to select businesses to invest into. This focus has helped tremendously in trying to reduce risk and hence try and protect the downside. Along with that, the ability to buy into good businesses going through bad times has helped create alpha for the investors.

As a fund house, you have more funds on the debt side whereas on the equity side you are present in only a few categories. What is the reason and what are your future plans regarding fund launches?

First of all, we have 11 funds on the fixed income side and 10 on the equity side. Therefore, if anything we are more balanced in our approach. The main purpose of any asset management firm would be of relevance to clients and offering choices based on their strengths. Investing in capabilities grow their strength too. We currently have most of the categories under fixed income covered. The gaps are on the equity side and therefore we will be looking to fill those gaps as early as we can. Also, we represent PGIM in India as the tenth largest asset manager in the world. This allows us to leverage our global expertise to bring relevant products and solutions to our clients. The global equity market is approximately USD 87 trillion in size with many sectors and stocks that are not represented in the Indian stock market. We already have diversified global funds like our PGIM India Global Equity Opportunities Fund and the PGIM India Emerging Market Equity Fund.

In 2019 you completely acquired the assets of DHFL. What is your expansion plan to gain market share?

The most important, if not only, factor of success for an asset manager is in having a consistent good performance track record for its investment platform. Everything else is secondary. Our focus is therefore in making sure that we continue with the great performance we have had across our domestic equity funds and international funds. Having the right talent in the right place is an evolving task as well. Ultimately, since the product itself is fairly commoditized, it will be our service which will be the key differentiator.

We trebled our client base in a short period of time last year and this has helped us understand where we need to be resourced properly, what processes to additionally monitor and the technology that will help enable scale with high quality. Leveraging technology as a key enabler for the business is a high priority. None of these strategies or tactics would work without a good culture at the firm. That’s my primary focus and I believe that we will get the market share we deserve

"Investors should invest only that proportion of their money in the equity market which they do not need for at least the next three years. "

With the recently accepted consultation paper with respect to registered investment advisor (RIA) by SEBI, how do you as a fund house cope with the independent financial advisors or mutual fund distributors?

As a manufacturer, we will work with all channels. We do believe that our international pedigree and experience helps us engage the RIA community as well very meaningfully. The advisor community including both RIAs and MFDs have played a stellar role for the Indian mutual fund industry so far not least of which is inculcating the saving and investment habit through SIPs. I am expecting that regulations will continue to evolve and make it easier to adopt this profession on a much larger scale. There is ample space for every business model to survive and thrive and help not only to expand the market but also assist the growing financial scope in India. We are engaged with RIAs and MFDs equally and are looking to add as much value as we can, given our global experience.

Presently the market seems to be quite volatile. So, how should retail investors invest in such market conditions?

Retail investors need to realise or take into account their objectives, risk-taking capability and investing horizon while investing in the equity market. Investors, depending upon their risk appetite, can invest across different risk buckets starting from a balanced advantage fund on the lower risk or lower return profile to a mid-cap or small-cap which will have the highest risk or highest return profile. Generally, investors make higher returns if rather than timing the market they spend more time in the market. Hence, investors should invest only that proportion of their money in the equity market which they do not need for at least the next three years.