We are very enthused by the promise the investment management sector is pointing towards. At the very least, this is an inflection point which will lead to a tangential growth of the industry in the next 5 odd years.
Fittingly so, the last year of the last decade took us on a roller coaster ride through the political, social and economic fronts – needless to say, it had a corresponding and I dare say the disproportionate effect on the capital markets exacerbated by the torrent of news flow we kept grappling with.
Having said that, the investment management business managed to hold it’s own during the year. Amidst all the gloom and doom, we found that the PMS industry was slowly and steadily inching ahead through the year.
To be sure, we have tried to glean some insights from the data available in the public domain. Data analyzed was for a period November 2018 to November 2019, just so that we could see the numbers stack up during the current calendar year, additional data as of January 2019 was also collated. (Top PMS providers above a Discretionary AUM of Rs 1,000 crore ranked by number of Investors – Source pmsbazaar.com) and could garner some interesting pointers:
1 No. of investors moved up from 1,01,427 in November 2018 to 1,13,965 in November 2019, an increase of 12.36 per cent. Looked at differently, in these schemes there was a net addition of 1,000-odd investors per month. A similar situation was seen during the calendar year as well. Clearly, in the savvy customer segment that the PMS industry caters to, smart money continued to flow into the capital markets through these schemes.
2 One of the more encouraging trends seen is that despite the number of investors increasing, the average ticket size has actually increased from 0.67 crores in November 2018 to 0.71 crore on November 19. This, despite the average ticket size dipping at the beginning of the calendar year to 0.64 crores, pointing towards an increased risk appetite for savvy investors as the year went by.
So if one were to do some crystal ball gazing, what could be the trends one could watch out for going forward…here are some thoughts:
1 Smart money a.k.a. money from HNIs and ultra HNIs are already moving into the alternate space and would continue to move to more concentrated portfolios seeking alpha. Conversely, there would be institutional money seeking beta and would move to ETFs.
2 Clear value propositions would have to be defined to retain investor monies. The brand of the fund manager(s) / fund house(s) or the most recent performance will help only to an extent. Long-term sustained performance deliverables basis a strong investment philosophy and a rigorous risk management framework will be increasingly sought after by the investors.
3 SEBI’s recent proposed regulations on the PMS front clearly point towards standardization of templates for reporting and communication, among other things. This will allow investor and distributors alike to compare investment options on a like-to-like basis, thereby fuelling further growth in the industry.
4 SEBI’s proposed regulations on increasing the minimum ticket size to Rs 50 lakh and increasing the net worth of PMS providers to Rs 5 crore will clearly lead to a consolidation in the PMS industry.
5 Investor level accreditation is something which the regulator needs to look at. Notwithstanding the savviness of the investor segment, it will always help if the investor is “qualified” enough to look where the investment is being made. A simple process to ensure this would definitely help.
We are very enthused by the promise the investment management sector is pointing towards. At the very least, this is an inflection point which will lead to a tangential growth of the industry in the next 5 odd years.
However, the biggest issue I see is that the regulator is tending to see every facet of the asset management industry through the ‘Mutual Fund’ lens. With over 300 players, a savvy investor segment and a current robust regulatory framework, this industry is competitive enough to grow on its own steam – SEBI’s proposed regulations will surely keep nudging it in the right direction.
The markets will tend to surprise in the short run, and hence it is very difficult to have a ‘2020 vision'(pun intended), but the long-term trends of the industry look very promising indeed!
Vikaas M Sachdeva
Chief Executive Officer, Emkay Investment Managers Ltd.
Vikaas is an industry stalwart with over two decades of experience. In the course of his career, he has held several influential and senior management positions across marquee financial service organizations. He has a broad range of interests across functions like sales, distribution, marketing, investment banking, product, and customer service.
Vikaas was the CEO of Edelweiss Asset Management Ltd, successfully turning around the business culminating in the acquisition of JP Morgan MF and was also the Global CEO of Enam Asset Management Ltd, where he oversaw both global and domestic side of the business. He has also worked with Birla Sun Life International AMC Ltd., and ING Investment Management (India) Ltd. He has been an erstwhile member of the Mutual Fund Advisory Committee (MFAC), a high-powered committee appointed by SEBI to advise them on governing the MF industry and he was also on the board of the Association of Mutual Funds of India (AMFI), heading the ETF and indexing committee, which submitted the first white paper on ETFs to SEBI. More recently he was associated with the Asset Managers Roundtable of India (AMRI), the nodal body for FPIs in the country. Currently, he is a member of the Advisory Committee of the India FinTech Forum.
