“Provided there is a degree of regulatory streamlining on how foreign investors sign up for the Indian markets, we will see foreign money coming in, Remember six times more money is invested in China than in India. Even if a fraction of that comes to India, you can imagine the impact it will have on the market, saysSaurabh Mukherjea , Founder, Marcellus Investment Managers
You have formed APMI (the Association of Portfolio Managers). How many participants are there? What is the objective of this? We all know PMS has become a force to reckon within the market now. What can be expected now that you have formed this organisation?
Rashim Bagga: I think it is a great day for APMI, the Association of Portfolio Managers. This is a trade body and an association for all the SEBI registered portfolio managers and there are 372 portfolio managers currently registered with SEBI. APMI has come forward to be a unified voice for the industry at large to get the entire piece together.
It is more of a communication flow to the regulator and from the regulator in terms of the entire piece, getting the entire framework together, getting the voice heard, getting the best practices in place and move forward with more and more pieces which come in and get in the efficiencies and make this as the investor’s choice as an alternative investment.
Good that you are getting like minded portfolio managers together to form this association. Till some years back, only the high and mighty enjoyed the services of a dedicated portfolio manager but you have spread the message of the benefits of a portfolio manager versus just parking your money in mutual funds. How do you see these phenomena grow because it has already seen a big growth in the last couple of years thanks to efforts like Marcellus?
Saurabh Mukherjea: The numbers are mind boggling. So at the launch event today which SEBI Executive Director Manoj Kumar attended, we learnt that a decade back portfolio management DPMS (Discretionary Portfolio Management) AUM in India was not even Rs 10,000 crore and today the same industry is managing the best part of Rs 3 lakh crore. If you assume that this number compounds 17-18% over the next decade or so, the industry will be worth around Rs 15 lakh crore, almost comparable to what the equity MFs manage today.
It has become a large industry and has created a lot of wealth in the nook and corner of the country. My reckoning is that the growth will continue. I think 70 or 80 PMSs were present today. As my colleague Rashim, the Principal Officer of APMI, told me, 80% of the portfolio management industry by AUM have already signed up for the Association of portfolio managers in India.
Wealth spreads courtesy the PMS industry. Regulatory interest in the PMS industry is also going to grow and trade bodies like APMI are a natural way to align the interest of consumers, of savers, of investors with that of portfolio managers and align that in turn with an interest of the regulator.
Talk us through a couple of factors or a few challenges, now that it is an organised body, would you like to address head on which perhaps has been showing great growth but what are some of the factors you would like to address collectively for the benefit of the investors, growth of the industry and the ecosystem?
Saurabh Mukherjea: There are two areas where there is both consumer interest and regulatory interest. The portfolio management industry gets its act together. The first is the whole subject of performance benchmarking.
We have 370 odd PMSes in the country, the regulated ones do not want them to report performance in a common way.
The regulator also wants an ongoing benchmark on where does Marcellus stand on head-to-head performance with say White Oak vis-à-vis Abakkus vis-à-vis Helios and so on. So, there is going to be a lot of effort on APMI’s part and on the regulators’ part to make sure that performance benchmarking for the portfolio management services industry is done in a uniform standardized easy to access manner.
The second is systems and processes. There is a lot of money now being managed by this industry as internal, technology and compliance systems and processes vary across the industry. I think there is a desire on everybody’s part to have a bunch of best practices which are widely expected, and we are learning from AMFI in this regard.
I think AMFI has done a tremendous job in laying down best practices and I think there will be a lot of focus in APMI to lay down best practices for the PMS industry, that the consumer’s interest is looked after, and the regulator is satisfied that we are doing a good job.
Let’s talk on the market. It all started with commodities collapsing but now crude is also collapsing. Brent is at $108, Give us a pulse of what the big HNIs are doing. Is there actually a lot of money waiting on the side to jump into the markets? Is it a good time to take a five, seven or 10 year bet?
Saurabh Mukherjea: A couple of constituencies like foreign investors’ endowments, pension funds are very eager. In fact I wrote a piece recently for the Economic Times on how foreign investors are lining up to enter. There are a bunch of regulatory issues they are keen to see clarified.
For example, the KYC norms, e-signatures for foreign investors, so provided there is a degree of regulatory streamlining on how foreign investors sign up for the Indian markets, we will see foreign money coming in, Remember six times more money is invested in China than in India. Even if a fraction of that comes to India, you can imagine the impact it will have on the market and the second constituency is obviously the APMI constituency portfolio managers are looking after HNWs wealth.
We have not seen any negative outflows despite all the mayhem in the market in Marcellus, we have not seen negative outflows and speaking to the other portfolio managers at the APMI event, it is also clear that HNWs are continuing to put money into the Indian stock market. I think those flows will increase if crude comes off.