Bandhan MF will be present in more locations after re-branding, says CEO Vishal Kapoor

Vishal Kapoor CEO Bandhan MF

Bandhan Mutual Fund — earlier known as IDFC Mutual Fund — is ready for the fourth phase of its lifecycle. The fund house was born in the year 2000 as the ANZ Grindlays Mutual Fund. Just a year later, in 2001, it was re-branded as the Standard Chartered India Mutual Fund. In 2008, IDFC took over and the fund house became IDFC Mutual Fund. Earlier this month, Bandhan Financial Holdings, along with GIC and ChrysCapital, completed the take-over and re-branding of IDFC MF.

The re-christened fund house will continue to be led by Vishal Kapoor, CEO, and his team. Since Bandhan Financial Holdings, the sponsor, did not have its own mutual fund, it chose to retain the management team of the erstwhile IDFC Mutual Fund. The continuity of the management is a big plus for its investors.

In an interview to Moneycontrol, Kapoor shares his views on what lies ahead for the investors of Bandhan MF. Below are the edited excerpts:

Since Bandhan Financial Holdings didn’t have an existing mutual fund house, the entire set-up of IDFC MF has been retained. What are the top three tasks for you in the near future?

Our shareholders are three large institutions with strengths in both the retail as well as the institutional end. That gives us a wide spectrum of investors they have served.

As far as the AMC is concerned, nothing changes. Not the nature of the operations, not the nature of the business, the people, the processes, the investment strategies, the products, the track record — none of these things change. Just that we have taken this opportunity to accelerate growth.

We would like to deepen our locational presence and increase engagement where we already have a presence by putting up branches and hiring more people.

We also want to leverage digital further to enhance customer service, to manage investments, for marketing, and for better cost efficiency.

And we plan to come out with new ideas and opportunities in terms of new products.

Bandhan started its life in microfinance. With its presence in rural India, how do mutual funds sit within the Bandhan universe?

Individuals have evolving needs across financial services products in their lifetime. In the early days, Bandhan helped individuals with access to low-cost funding for their businesses and set them on the path to prosperity. Subsequently, as a bank, Bandhan offered savings and deposit products, and some third-party products, along with loans of different natures and size. I think mutual funds are a natural extension of this journey.

You have a new head of equities at Bandhan MF. Most of your equity schemes have not rewarded investors. How do you plan to change that? Are you planning to hire more fund managers?

Manish Gunwani joining as Head Equity is a great addition to our team. When I look at our performance last year, the bulk of our equity assets are in the top two quartiles. Going forward, we want to deepen our coverage in the number of stocks that we track, which means that we may need more analysts. Also, risk management has evolved considerably. We plan to leverage both our experience as well as the new tools available to manage risk better.

Do you intend to launch new schemes this year? Bandhan MF isn’t so big on ETFs and passives. Does your roadmap include such funds?

The debate about active and passive funds sometimes misses the point that at the end of the day things have to work for a given purpose. We are looking for opportunities. Whichever strategy — active or passive —is best placed to tap it, we are open to launching a product on those lines.

ALSO READ: March 31 deadline for MF nomination gives headache to investors

We have launched products in the passive, smart beta, and active spaces. Going forward, product expansion on the equity side will be determined by where the opportunities are. They could be in thematic funds or solution-oriented funds. We recently launched the Bandhan US Treasury Bond 0-1 year fund of fund, where we are the first mover.

Bandhan MF has stubbornly stayed away from credit risk. Will that change?

Out debt framework clearly articulated three buckets of products. The liquidity bucket, where you are looking for immediate parking. The core bucket, which includes debt products wherein generally investors match their holding period with the duration of the product. Most fixed income investors invest in these two categories and safety is a prime concern.

ALSO READ: Balancing Act: How large and midcap mutual funds pick the best stocks across categories

In the third bucket you take some risk – either duration risk or credit risk.

There will be opportunities in both duration and credit risk. In the last couple of years when interest rates were going up, duration risk is not something you wanted to take. Also, credit spreads have been compressed. Since we are not getting paid enough for diluting quality, we may as well stick to high quality.

ALSO READ: Three tips for freelancers for a healthy and wealthy life

But when the tide turns, there may be times in the future when taking risk pays adequately. As a fund house, we will offer a range of products right across the spectrum. But we will clearly define those products and we will not mix the buckets by introducing risk where it should not be.

Investors are worried about the volatility in the stock markets. What should be the right investment strategy at this moment?

Investors should be using volatility in their favour through systematic investment plans and systematic transfer plans, and avoid knee-jerk reactions to market movements. Changing your portfolio allocation because of some sudden market movement can hurt your portfolio in the long term. Keeping track of your financial goals helps.

Rising interest rates have been a cause of concern for borrowers as well as equity investors. What is your view on interest rate movement?

A quick upward movement in interest rates by almost 500 basis points in developed markets is a big shock. We can't be immune to global volatility. So foreign flows will continue to be a big determinant of how the local equity markets behave.

From a debt market standpoint, if one believes that the bulk of the rate action is through, then it may be a good time for people to start moving out of the very, very short end that they've been holding money in, expecting interest rates to rise. Now the yields at the medium end can be considered quite attractive in (inflation-adjusted) real terms.

Equities could remain volatile and offer an opportunity to invest. Stick to your asset allocation and do not shun either equity or debt.