Sandeep Bagla: A fixed income market champion who is now building Trust MF brick by brick

Sandeep Bagla, CEO, Trust MF

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.

Trust Asset Management Company, one of India’s newest fund houses, launched its first scheme (Trust Banking and PSU Debt Fund) on February 1, 2021. But its Chief Executive Officer (CEO) Sandeep Bagla’s task of building a fund house from scratch had started months earlier.

Early years

Born in a middle-class business family from Kolkata, Bagla studied Economics and did a brief stint as a business journalist before moving to Bhubaneshwar to study management at Xavier Institute of Management in 1992.

The Indian economy had opened up, and people were warming up to new ideas and there was optimism in the air. “I was not decided on career choices at that moment but was very clear I would rather be in business and finance,” Bagla says.

Immediately after completing the course in 1994, he joined ITC Classic Finance, a non-banking finance company (NBFC), which subsequently merged with Industrial Credit and Investment Corporation of India (ICICI) – the parent of ICICI Bank. This merger brought Bagla to Mumbai and offered him a big canvas.

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Bagla calls the then ICICI a great learning ground “because of the empowerment it provides to individuals and the generally aggressive stance of the company.”

In his initial days, Bagla was involved in the issuance of ICICI Safety Bonds. These bonds were very popular among retail investors those days. At ICICI, Bagla used to report to Madhabi Puri Buch, now Chairman, Securities and Exchange Board of India (Sebi).

“She was a very dynamic boss. I learned from her due diligence procedures, how bonds are structured, laws regarding issuance of bonds, the first look of distribution, and then managing a bit of public relations for the bond markets,” says Bagla.

His subsequent move to ICICI Treasury as a trader opened doors to a new world for Bagla. “We were very aggressive traders, offering two-way quotes across the curve. We had a book of close to Rs 1,000 crore at that time, which was large in those days. Out of every three trades in the market, ICICI was a counterparty in two,” he reminisces.

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This was 1998-2000 when interest rates were coming down and bond markets were thriving and so were the people trading in bonds. A few smart traders, including Bagla, made a name for themselves. Bagla’s early grounding in the debt market would come in handy in later years.

Trading bonds

Bagla was not one of those who would be content with past laurels. In 2000, he moved to ABN AMRO Securities Primary Dealership. The journey from a private sector NBFC to a public finance institution (ICICI) to a foreign securities firm-backed primary dealership gave him a glimpse of varied environments and best business practices to Bagla.

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He then moved to Reliance Mutual Fund as a fund manager for fixed-income schemes in 2002. After two years, he moved to Principal PNB AMC and headed the fixed-income team, before he moved to AIG Mutual Fund to head its fixed- income investment team.

Some mutual fund industry veterans throw light on his prowess as a fund manager. “Street smart guy he was. In those days of telephone markets, he was very well connected with brokers. He knew what makes money for investors,” says a senior hand in the mutual fund industry on condition of anonymity.

Another senior fund manager with a rival fund house, who wish not to be quoted, calls him an optimiser of returns and not maximiser. “He was aggressive as a fund manager but always had an eye on risk. He would not go after the last rupee on the table,” he adds.

Bagla decided to go to ICICI Securities Primary Dealership (ICICIPD) in September 2008. “Mutual fund environment at that point of time was quite different. The rules were not so tight. Liquid funds could take up to one-year bonds and the short-term rates were fluctuating between 6 percent and 9 percent. So, for a smaller fund house to compete with large fund houses was becoming more and more difficult,” he says.

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When asked what he liked the most, other than bond trading, in his stint with ICICIPD, Bagla says: “Being the primary relationship manager for RBI (at ICICI PD), I got an insight into how the regulator's mind works and what are the pushes and pulls from RBI's perspective, because RBI is both a merchant banker to the government and sets its monetary policy.”

Planning ahead

Bagla joined Trust MF as its CEO in August 2020. However, he has been with the Trust Group since May 2014, setting up its FII business, Gift city operations for the group, and managing debt PMS.

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When asked about how he sees the trend of investment specialists – fund managers becoming CEOs of asset management companies -- he says: “As the industry sees rapid growth, compliance rules need to be changed. The regulator wants to craft rules to distinguish between retail and HNI products to protect the rights of the small investors. In such a scenario, the role of the CEO becomes more complex.

It entails interacting with the regulator, following regulations and compliance, among other things. It requires understanding of the product as well as distribution.” He sees this as a welcome trend. Now the CEO group in the mutual fund industry is a good mix of people from various backgrounds, and hence the decision-making or quality of discussion is more diverse, he adds.

As CEO of Trust Mutual Fund, he has a task on hand. The fund house started with the launch of fixed-income schemes at a time when money was going out of bond funds, with rising interest rates. Across six fixed-income schemes, the fund house manages assets under management of Rs 1,043 crore, as on May 31, 2023.

Despite initial headwinds, Bagla is of the opinion that both equity and fixed income are here to stay in most investors’ portfolios. He highlights the investment framework his team has put in place at Trust MF to avoid extra risk with the help of CRISIL, and the use of bespoke indices for his schemes in line with the guidelines in a bid to differentiate his fixed-income schemes. But these things work over a period of time. For the time being, his team is busy putting in place a track record which will attract investors’ money in future.

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All said and done, Bagla has decided on a three-pronged growth strategy for the mutual fund. “Increase the product basket by bringing in hybrid and equity funds, reach out to more distributors in more locations, and build a public image, which is clear and credible and consistent - what we stand for,” he said.

At a time when the Indian mutual fund industry is getting ready for the next big leap, and with increased regulations, it would be interesting to see how Trust MF differentiates itself from nearly 40 competitors.