LIC Mutual Fund, India’s 23rd biggest asset management company (AMC), which merged IDBI MF effective July 29, is undertaking a review of the schemes that got added to its portfolio from the merger, TS Ramakrishnan, Chief Executive Officer and Managing Director, LIC MF said.
With the completion of the merger, out of 20 schemes of erstwhile IDBI MF, 10 got merged with similar schemes of LIC MF and 10 will continue with the merged AMC on a standalone basis.
The 10 standalone schemes include small-cap, mid-cap, dividend yield and gold fund. The fund house is betting on these schemes, which have been in demand in the recent past, to boost its AUM further.
LIC MF, which had assets under management of Rs 24,133 crore at the end of July 2023, is sponsored by the Life Insurance Corporation in India (LIC).
Performance driven
Launched in 1989, the fund house in November 2009 was the sixth biggest AMC with assets of around Rs 50,000 crore. However, the fund house had assets of Rs 19,000 crore at the end of June 2023.
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“Our fund managers are trying to see, which stocks among them (new schemes) are performing, which are not performing and analysing if any changes are required. We have certain principles for stock and equity selection, which include discussion with the management and having a long-term view. If required, some stocks will be weeded out and some will be added too,” said Ramakrishnan.
The fund’s flagship products such as balanced advantage, large & mid cap, banking and financial services and infrastructure funds, would remain unchanged.
As per Ramakrishnan, the main focus of the fund house now is to ensure performance in every scheme going forward.
No rush to add to the kitty
Historically, the fund house has been tilted towards debt funds. Since the last three years, the fund house has started focusing on equity. While the assets had largely remained stagnant at around Rs 18,000 crore (before the IDBI MF merger), the equity portion has gone up from 21 percent to more than 42 percent within this period.
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With the merger of IDBI MF, LIC MF has been able to expand its equity fund portfolio in one go. Usually, launching 10 new schemes in the Indian mutual fund market would need a two-year time frame.
While the fund house has identified some opportunities in launching thematic funds based on consumption, manufacturing, and information technology sectors, it would likely take a restrained approach.
“No point in expanding the product basket without improving performance in existing schemes,” Ramakrishnan said.
Phygital Push
The AMC identifies itself as a mutual fund of the Indian middle class. A majority of the funds’ investors are based out of tier-II and III cities.
However, a key growth in the assets of the Indian mutual fund industry has come from millennial investors.
To tap new investors, the fund house recently revamped its website while it also plans to launch an app soon.
Apart from this, the company also sees potential in online mutual fund platforms.
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However, a key concern here is that on online platforms, a deciding factor for do-it-yourself investors is the past performance of mutual funds.
However, data available with Value Research shows that on a three or five-year basis, none of the LIC MF’s schemes has featured in the top 5 list in terms of returns, in respective categories.
“We have started focusing on improving performance in our equity schemes. Things may not be achieved overnight but you will see the results a year or two down the line. We have strengthened our equity team, earlier it was five, now it is a nine-member team, and this will be increased depending on the need. Also, analysis or research will be carried out in-house going forward,” said Ramakrishnan.
While the fund house acknowledges the need for a digital push, it will continue to deepen its physical presence.
LIC MF has 35 full-scale pan-Indian branches. Further, there are 25 business centres and additional one-person offices.
With the IDBI merger close to 3,000 mutual fund distributors have been added to the LIC MF, which is important in terms of catering to the needs of retail investors.
Bullish on India
On India’s changes in the upcoming decade, Ramakrishnan said that demography and democracy are key positives for India.
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“We have a young working population, which is very equity savvy. Plus, we have a very stable government. The third is increasing GDP and per capita income. You will not find a place or a country where all these parameters are present in one place,” he added.
The head of LIC MF also highlighted that the government’s policies such as Atmanirbhar Bharat, Manufacturing in India and entrepreneurial-friendly approach, where people are allowed to experiment without getting unduly punished for failing, will go a long way in ensuring that money continues to flow into Indian sectors.
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