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.
Navneet Munot’s career spanning close to 30 years is spread over just three firms! Aside from a small one-year stint at Morgan Stanley Investment Management from December 2007 to December 2008. Clearly, Munot doesn’t just believe in long-term investing, he also believes in sticking around with his employers for the long-term.
Munot, who now heads HDFC Asset Management Co Ltd (India’s third-largest mutual fund house with assets worth Rs 4.6 trillion), started his career at the Aditya Birla Group in February 1994. Born and brought up in a small town called Beawar, 60 km south of Ajmer, Rajasthan, Munot moved to Mumbai after completing his chartered accountancy with merit.
He joined the Birla Growth Fund (not to be confused with a mutual fund), the holding company of the Aditya Birla Group. The group was just entering the financial services business at the time and set up a mutual fund in partnership with Capital International in the same year.
Later, the group also launched an insurance, broking and distribution business, this time in partnership with Sun Life of Canada. Eventually, Sun Life replaced the Capital group in Birla’s mutual fund venture as well.
Munot, however, didn’t cross over to the fund house till almost five years later. In the meantime, he played many roles, all the time honing his skills. From being a market-maker at the Over-The-Counter (OTC) Exchange of India (India’s first tryst with screen-based trading, as opposed to the open outcry system at the Bombay Stock Exchange prevalent then), dealing with the first wave of non-convertible debentures, to advising the insurance arm on investments as it was being set up, Munot also dabbled in forex advisory for the group and worked at Aditya Birla Sun Life Securities on the sell-side. Around 1999, he joined the fund house full-time as a dealer and debt fund manager.
Also read: Meet the CEO of a fund house that has worn the hats of a batsman, bowler and a coach.
At the time, the fixed income market was in a different space - interest rates were abnormally high when compared to today’s levels. “When I started out at the Aditya Birla Group, the yields on government securities were around 14 percent. Corporate bonds used to be traded at yields of 16-18 percent,” he recollects. Debt funds ruled the roost owing to the crash in Information Technology stocks around the year 2000 and to the 9/11 US terror attacks, after which stock exchanges were shut down for a few days.
When the days of fixed income funds were over, equity markets reached the bottom and attention shifted to equity funds. “Equity markets were ripe for an uprising, and we were ready for it,” says Munot. At the time, around 2004, the fund house launched a dividend yield fund, a SENSEX-based index fund.
After a brief stopover at Morgan Stanley Investment Management, Munot joined SBI Funds Management in December 2008 as Chief Investment Officer. SBI Mutual Fund (MF) was coming off a bad year. The Lehman crisis had ravaged capital markets and the global financial landscape. SBI MF had launched many new schemes by then; many were in bad shape.
Also read: A fixed income market specialist who is now at the helm of a brand new fund house
Despite the public perception of a state-owned fund house, SBI MF had, by then, earned a reputation of a powerhouse performer. Munot got the freedom to expand his team and manage funds the way he wanted. He strengthened the processes, while also giving freedom to his fund managers. During his tenure, SBI MF’s assets under management grew 27 percent on a compounded basis, from around Rs 19,000 crore in December 2018 to Rs 3.58 lakh crore in January 2021. This is apart from the mandate SBI MF seized from the government to invest the incremental flows of Employees’ Provident Fund Organisation.
At SBI MF, Munot also pioneered the ESG (Environment, Social, Governance) framework, for fund management. Last year, Munot also chaired the SEBI (the capital markets regulator, Securities and Exchange Board of India; SEBI) appointed committee on ESG.
In January 2021, Munot joined HDFC AMC as the Chief Executive Officer.Munot is not perturbed by change, rather he thrives in it! At HDFC MF, Munot quickly got to work. He hired several new fund managers, broad-based the scheme basket and launched many new schemes, especially passive and thematic funds, neither of which were popular at HDFC AMC, historically. HDFC AMC has since launched 14 exchange-traded funds, six index funds and four thematic funds. Munot also revived its Portfolio Management Services (PMS) business and made forays into Alternate Investment Funds (AIF).
HDFC AMC is listed on the stock exchange. Who is more important to him, the unitholder or the shareholder? “Both are important stakeholders. I always have to earn the trust of the unitholder as well as the confidence of our shareholder, all the time,” he says. Is that conflicting? “No. In the long run, what is good for shareholders is that we do well for our unit holders. If unitholders give us more money to manage, that’s the best thing that could happen to our shareholders,” says Munot.
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