Debt is his first choice: Rajiv Shastri’s journey from broker to CEO of a mutual fund

Rajiv Shastri, 51, Chief Executive Officer of NJ Mutual Fund has seen the rise of the Indian mutual fund industry closely.

Note to readers: Mutual funds’ chief executive officers are of broadly two types. One group typically rises from fund management. The second group rises from sales and marketing background. Who is better at heading a mutual fund house? The jury is still out. In this series of CEO profiles, we look at the successful fund managers who went on to head fund houses, later in their careers.

Rajiv Shastri, Chief Executive Officer, NJ Mutual Fund, one of India’s youngest fund houses with assets worth Rs 4,300 crore, has moved from larger fund houses to smaller and smaller ones.

But his career trajectory has gone up in the process. It is not hard to see that Shastri, 51, has seen the rise of the Indian mutual fund (MF) industry closely.

Shastri says many chief executives of MF houses have a fixed-income background. Nilesh Shah of Kotak Mahindra Mutual Fund and Trust MF’s Sandeep Bagla are two examples.

A long-winding road

Before gravitating towards MFs, Shastri started his career as a broker at Asit C Mehta Financial Services on the foreign-exchange broking desk.

His journey into mutual funds started with Aditya Birla Sun Life Mutual Fund, alongside A Balasubramanian, current CEO and MD, as a debt dealer.

An avid student of macroeconomics, debt has always been the first choice of Shastri.

“Macroeconomics, debt and forex markets are all very tightly connected. Sometimes the equity markets can move away from the macro scenario, but debt markets can never do that,” he said.

Also read | ITR filing: Annual Information Statement gets bigger, but crucial omissions give taxpayers a headache

After a little over a year with ABSL MF, he joined HDFC Mutual Fund in 2000, as a fund manager. That was the time HDFC AMC was just getting set up. Shastri was part of the founding team. That experience held him in good stead as it was his first time managing funds. Eventually, at HDFC AMC, he went as high up as being the head of fixed-income funds.

After HDFC MF, Shastri had a brief stint at ABN AMRO Asset Management (India), from where he joined Sahara AMC in 2005, a decision which was “very foolish in hindsight”.

“The judgment at that point was that I could survive it. There was a debacle at Sahara and the whole thing did not work out, but my career did survive,” he says.

Sahara Group has been engaged in a long-running regulatory and legal battle with the Securities and Exchange Board of India.

Sahara happened to be the first general management role (as chief executive officer) for Shastri, which came at 33 years. Shastri also had stints at Lotus India AMC (acquired by Religare MF in 2008) and Essel Finance AMC (formerly Peerless Funds Management).

In 2021, he joined NJ AMC, which follows the 'Rule-based investing' philosophy.

Changing dynamics of fund management

In his early days, deals in the fixed-income space used to be completely phone-driven and happened in the middle of the night, Shastri recalls. Integrity, he says, was very crucial in debt markets in the absence of screen-based trading.

“A particular fund manager did a deal at 1 O'clock in the night, and then came in the morning and entered the deal and got it settled. Your word was the bond,” he says.

The mutual fund expert is of the opinion that processes have improved dramatically in the fixed-income space.

At the same time, Shastri admits that the equity space has seen a more dramatic transformation than fixed-income space. “Valuations are much bigger on a relative basis, and that is where the heft that equity fund managers have is far greater than what it was then.”

Humans versus algo debate

At NJ MF, Shastri is walking a new path. The fund house plans to specialise in data management. It plans to launch funds that require minimal intervention; most of them run on data.

Also read | DSP MF rolls out tech sector ETF after dismal year for IT stocks. Time to scoop up IT stocks?

To be sure, these won’t be the same as passive funds. The fund house will launch and manage rule-based schemes. They would be driven by factors like value, quality, momentum and volatility. On the debt side, NJ MF has said that it will only invest in short-term securities and Treasury Bills.

The question is: with Shastri’s upbringing in debt funds, what does he feel about passive debt funds, a category that has attracted quite a bit of attention in the past 2-3 years?

Shastri believes that launching passive funds on the debt market is very difficult.

“On the debt side, an issuer can theoretically issue limitless instruments. Therefore, managing instrument-level liquidity is next to impossible. Even the government of India has close to 1,000 bonds outstanding at any point of time, but just a handful of them trade every day,” he said.

Shastri says that they will look to launch a duration-based passive product, but a credit-based passive product is out of the picture.

Key learnings in life

A key financial advice which Shastri received from his parents was never to take personal loans. “A housing loan is the maximum. In essence, it was not permitted, but was not frowned upon. But on a personal level, we do not take loans. Both me and my brother had followed that advice.”

One memory from his professional life he always cherish is when he went against the market advice and most of his debt fund manager peers, and still got the interest rate call correct in early 2000s.

Also read | Bonds, equities or gold? Which is the best asset class while RBI makes up its mind on interest rates?

Shastri says learning how to manage a team was something he learnt the hard way and along the way.

“Managing money is quantitative and can be quantified. When dealing with people, that quantification is more or less absent,” he said.

Do fund managers make good CEOs? He says yes, but adds that anyone who knows and respects processes can become a good leader.

“If you have a sales and marketing person who is process-driven, they can make fantastic CEOs too. Similarly, if you are a fund manager who is inherently process-driven, but also understands the sales aspects, he/she can also make a very good CEO,” said Shastri.

But why do most fund manager-turned-CEOs in the Indian MF industry come from debt markets? Shastri believes it is the foundation. He says it is his foundation in the debt markets that has made him a better manager.