The ‘Tata’ name has inspired trust and quality for more than a century. But the same cannot be said of Tata mutual fund, which is placed as India’s 13th largest fund house instead of being in the top five. Perhaps, the reasons for such a state lie in the frequency at which the fund house has had changes in leadership at the top. When Prathit D. Bhobe joined the fund house as its chief executive officer (CEO) in May 2018, he was the fourth CEO in eight years. Apart from lack of continued leadership, the fund house has been plagued by poor and inconsistent performance, a legacy of new funds launched many of which lost their mojo over time and an insipid sales team that many advisors have often complained isn’t as aggressive as those from larger fund houses. Moneycontrol’s Kayezad E. Adajania talks to Prathit about the plans to make Tata MF more relevant than before.
There have been so many changes at the top. Are you the right person for this job?
A mutual fund must have consistency. The head of a mutual fund must have a clear strategy of what he wants to do and then keep doing it over a fairly long period of time. A fund house needs a person who’s going to be here for a long period of time, to be able to execute the strategy. Today, we have a well-defined strategy, which is well-known to every individual of the organisation and something that we communicate to the external world as well. Our strategy is about 4Ps – Performance, Partnerships (distributors and advisors, and to some extent directly with investors), Products and People. We need to have the right set of people to execute the first three.
Let’s start with performance. The long-term performances of Tata MF’s schemes have been quite average and inconsistent. Have you identified the problems?
Rather than seeing what’s wrong, I felt that a better approach was to chart out what we can do. We recruited Rahul Singh as the chief investment officer-equity, in October 2018. His first mandate here was to lay down an investment framework. The entire fund management team had to have one framework within which we need to operate. Internally, we need to define what we stand for. Today we have an investment philosophy and framework in place.
Was it not there before you came?
I didn’t see any defined investment policy or framework. I don’t think such a thing was defined and communicated. Today I am telling you that the strategy has been laid out and communicated.
Tata is a trusted brand. Yet, your fund house isn’t in the top five…
I agree. Why we aren’t in the top five when Tata MF inspires trust and we are here managing people’s money, is something that has baffled me. In my first year here, whenever I went out for my meetings to meet distributors, advisors and investors, the usual objections we had were about frequent CEO changes and so on, but there was never any concern about brand ‘Tata.’ The opportunity is there for us; we just need to execute the strategy well. What really did not surprise me though is why people have not stuck around for so long.
The market should know that we will be consistent, going ahead. I think it has happened a bit too many times probably earlier that perhaps something was said, but wasn’t really delivered because people have changed. That’s why if we have a stated, well-communicated investment objective that’s applied consistently in our fund management, there is no reason why we shouldn’t do well.
Many times, when CEOs move, fund management also changes. You’ve lost good fund managers too. Performance can also suffer, as a result. What have you done to ensure fund manager stability?
Actually, we haven’t lost too many fund managers.
But let’s ponder: in the service industry, why do people leave? Most of the time, it happens when they feel there is no future in an organisation. Of course, there will be other reasons such as compensation and role. But, in my experience, if people can relate with the objectives of the organisation, they won’t be eager to leave.
When the organisation has clarity about what it wants to do and where it wants to go, and then communicates to its employees well, they start to relate with the firm better. This works across teams. Today, fund managers are very clear about the investment strategy, framework and process.
Also, we now have a second fund manager in every MF scheme as a back-up. The fund philosophy shouldn’t change every time a fund manager leaves and a new person comes on board. Having a back-up fund manager in the house ensures that the fund continues to deliver smoothly.
In the last one year, Tata MF has launched many new funds; balanced advantage, multi-asset, quant, a ‘focused’ scheme among others. Tata MF was known as a NFO factory once upon a time and, now again, you’ve gone on a launching spree. Shouldn’t you be strengthening your existing funds’ performance first?
We want to be a full-service fund house. We have to be there for all kinds of investors, at all points in time. If a customer walks in and says she wants an arbitrage fund, and we don’t have one at the time, then I am never going to get this investor in.
We’ve launched funds in the mainstream categories, which were not present before. The question is: do I have it on the shelf or not? If I have it then I have to perform, no matter what. It’s size could be Rs 100 crore or Rs 5,000 crore. I cannot say ‘let me get performance and then let us launch other funds.’ These are two different objectives.
The reason we launched so many funds of late is that many (distributor) platforms have their own criteria for evaluating performance. Some look at one-year performance, some look at the three-year track record and so on. If we don’t fill our product gaps for a long period of time, our on-boarding on such platforms get delayed. Hence, we have to be on the platforms fast. Our new funds have done well too.
Also, there’s a difference in the way we have been launching new funds of late. Between the years of 2000 and 2010, we launched a lot of infrastructure-themed funds. We had a lot of launches, but they also had the same theme: infrastructure. Hence, in 2008, after stock markets crashed post the Lehman crisis, all these funds went through the same pain, irrespective of what names they were called by, because of the common infrastructure theme. Whereas, in the last year and half, we have launched mainstream funds and all are different from one another.
Tata MF has had a few accidents on the debt side. Was that an industry wide phenomenon or did your fixed income team fail to analyse credit properly?
Just as in equity, we have built a credit framework on the fixed income side after Infrastructure Leasing & Financial Services’ default happened. We’ve created our own scoring and evaluation matrix and we do it across multiple parameters. We will invest only if it crosses the hurdle we have laid out. It’s a fact that we had an exposure which hit some of our funds. Today, we run clean portfolios, thanks to the approach that we have adopted. We were the first fund house to adopt side-pocketing.
When it comes to launching new products, how much of a say your investment team has? Who gets to be heard more; your fund managers or the sales team?
We have committees internally. They are cross functional. For example, our product committee is represented by every function; fud managers, business development, compliance, investor services and so on. All our new ideas and concepts are discussed, debated and approved by the product committee. The advantage of a cross-functional committee approach is that, tomorrow, none from the investments or compliance or business side can claim that they didn’t know or didn’t get to express their opinion.
There have been some ideas put in front of this committee that weren’t approved. We dropped such ideas. To answer your question: if the investment team feels it doesn’t have the capacity or the product is a bad idea, we don’t launch that fund.
Do you think you’ll get a free hand to implement your vision? You’ll have a lot of cleaning up to do. The Tata Group is an age-old house.
The good thing at Tatas is that each company here is managed by an independent board (of directors). And then the CEOs of each of these firms run them. The Board understands where we are at the moment, why we are insignificant and what we need to do. The Board backs me up completely.
So, the message from the top is that Tata MF is here to stay
Yes. And we will grow it.
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