Ajit Dayal, Director of Quantum Advisors, is a veteran in the financial services and investment management business with over 25 years of experience of managing funds in various capacities in the US and UK. He discusses the distribution challenges faced by asset management companies in India.
Excerpts of the interview from Businessline
Why did Quantum Asset Management Company, your 100% subsidiary choose to restrict itself to the online space and not use the distributor route?
We have no issues with distributors provided they disclose to their clients the commission that is being paid to them by AMCs. The more information investors get, the more questions they are able to ask, for example they can ask questions to a distributor on why he is pushing a scheme which gives him higher commission. There are many distributors who invest in our schemes but do not ask their clients to do so.
On our part we will think about using distribution channels when the level of transparency enhances. Coming to the online channel; we have access to markets where no fund house has a branch and now we also have a track record. Our thought process is simple and we focus on simple products.
Why should distributors disclose their fees?
Take for instance an equity scheme of a large fund house which has an AUM in the Rs 80-90 billion range. Nearly one per cent of this paid to distributors annually (around Rs 800 -850 million) and the investor has the right to know what is being paid. When AMCs can disclose details of brokerage paid, custodial fees paid then why not distributor commission? The fact remains that the MF industry needs to re-look at distribution costs.
What is your take on the extant regulations in the MF industry?
As of now it is rightly regulated. In the financial services business the centre of attraction should be the investor, otherwise people would buy over governments and policy making. A large chunk of profits made by financial services firms globally were not due to right methods and that is why the crisis of 2008 happened.
The brokerage that you paid has increased year on year in some of your schemes? Did you churn your portfolio often last year?
Yes we did book profits.
You have either said yes to resolutions of companies where you have invested in or abstained from voting? Why?
If we do not like the way a company governs itself we prefer to sell their shares and get out of the position. However in one case, we were against a merger of a private bank (where we had invested in) with another but chose to stay invested because the management quality was excellent.
How many PMS clients are fund houses being able to attract today?
The shift that is happening is uninformed. People ask us whether we can run their investment books like a PMS and want personalised service for very small corpuses. PMS should be the preserve of the ultra rich, institutions and trusts. Mutual Fund is a transparent product unlike a PMS. We had a PMS licence in 1997 but we gave up in a few months.