As a state-level badminton player, Milind Barve could have made a name for himself in sport. As things turned out, Barve, 63, will retire as the managing director of HDFC Asset Management Company (AMC) later this week. Barve has been the longest-serving chief in the Rs 30 trillion Indian mutual fund (MF) industry.
Throughout his career – apart from a brief period of six months in 1982, when he worked at Bajaj Auto in Pune soon after his CA – Barve has been with the Housing Development Finance Corporation (HDFC) group. Banks and other non-banking financial institutions hadn’t yet started to give home loans. At 26, when Barve applied for a job at HDFC, the legendary Deepak Parekh, now chairman of HDFC, interviewed him.
He was impressed with Barve's quiet zeal. After being groomed through various departments through his 16-year tenure at the housing finance firm, Barve was not sure whether he should quit HDFC and head HDFC AMC, which he had helped set up. He had gone to Parekh’s office for some work in early 2000 and asked him if he should take up this role. Parekh advised him that it will be a good move for his career and in case he was not happy, he could always come back to HDFC.
Changing gears to run a mutual fund
When HDFC AMC was started in 2000, Unit Trust of India dominated the MF industry, managing Rs 68,524 crore worth of assets. The MF industry had just crossed the Rs 1-trillion mark around this time. Private sector fund houses had just taken off. HDFC Mutual Fund was at the right place at the right time.
The fund house benefited from the massive fall in interest rates between late 2000 and 2004. The 10-year government security fell from 10 percent to 5 percent; debt funds returned 11-14 percent in this period.
But just before the great bull-run began in 2004, HDFC AMC acquired Zurich India Mutual Fund in 2003. Prashant Jain, who used to head equity funds at Zurich India, joined HDFC AMC as the head of equities. By 2011, HDFC AMC became India’s largest fund house, with assets worth over Rs 91,000 crore.
Barve ensured that the fund house made good use of its scheme management skills to give something back to the society. To commemorate its 10th year in operations, HDFC MF rolled out a HDFC Debt Fund for Cancer Cure in 2011. It launched this fund in collaboration with Indian Cancer Society (ICS). The aim was to channelise investors’ money towards poor cancer patients who needed the money for their treatment. The cancer fund was a three-year closed-end fund. The fund house didn’t charge any asset management fees for this scheme. So far, the fund house has managed three tranches of this fund and together with its own contribution, has given Rs 155.57 crore to the ICS. This amount ensured free treatment to over 10,000 cancer patients.
A people’s man
But Barve also knew that to run its organisation smoothly, it needed happy people. How did he motivate people in a highly competitive industry? Aside from insisting on calling everyone on a first-name basis and a flat organisation with limited grades (this had to give way to people’s aspirations, eventually), Barve also made sure that people were paid well. “If we needed to pay somebody because they were valuable assets for the company, we didn’t flinch at that,” says Barve .
But more importantly, Barve says that he was a fair boss. “It was most important to treat them fairly and support them when their performances were not good,” he says. That is an attribute well-documented in the fund house’s history as its equity funds went through a rough patch between 2014 till about last year, after years of top performance.
Cracking the whip when needed
Barve may be suave and soft-spoken. But deep inside, he is an astute businessman. He managed to keep his flock together in the most competitive years of the mutual fund industry, under his tenure. Meanwhile, HDFC AMC also successfully acquired two fund houses – Zurich India Mutual Fund in 2003 and Morgan Stanley India Mutual Fund in 2013.
But Barve’s patience, leadership and the fund house’s credibility were put to test in 2010 when the Securities and Exchange Board of India (SEBI) caught a dealer employed in the fund house’s equity trading desk doing front-running. Front running is a corrupt stock market practice that involves a market participant – usually a dealer or a broker – entering the equity market before a large institutional investor (typically a mutual fund) transacts in the same set of shares that the institution trades in. The aim is to make profits with the information available, of what the institution would buy or sell. The episode remains one of the toughest events of his career.
“Just dealing with the fact that an employee or person you trust could do something like this, came as an enormous emotional shock to me,” Barve says. He had insisted then that the fund house should make sure that unitholders didn’t lose “a single penny” because of this incident.
Since then, HDFC AMC is the only fund house, Barve says, that does a perpetual forensic audit of its dealing room. The fund house eventually recovered from this setback as it demonstrated its seriousness in plugging the loopholes.
What drove him to keep the fund house clean at all costs? “It’s okay to grow a little slowly or for fund performance to be not that good. But the brand must not be hurt because HDFC Mutual Fund is a franchise of that brand. Investors must never suffer,” he says. Barve recalls that in HDFC Ltd’s early days when small borrowers used to queue up at its office with their loan application forms, Deepak Parekh used to take rounds to assess the customers, himself. And if he noticed a customer waiting in the queue for long, he used to go to the back office and ensured speedy clearance.
Barve is now looking forward to his retired life and spending time with his two children who are currently in the US.
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