Etrarkets Smart Talk | A. Balasubramanian: Lessons in conviction, agility and calmness of 30 years of experience in markets

In this edition of Etrarkets Smart TalkA. Balasubramanian, MD & CEO of Aditya Birla Sun Life AMC, shares the largest lessons he has learned for three decades of navigating through multiple market cycles.

From the importance of high conviction and agility to the need for risk race and a cool head in volatile times, Bala reflects on his journey as a fund manager and industrial leader.

He also opens the ambitious RS 10 Lakh Crore AUM -target of the AMC, the rising role of alternatives and Giftad, and why sips remain the “Sabse important plan” for Indian investors. Edited fragments –

Kshitij Anand: Well, just let me get your perspective. You have seen several market cycles over the past three decades. What were the biggest lessons for you as a fund manager and as the market leader?

A Balasubramanian: Well, the lessons are a lot. One thing I have realized as a fund manager, and now 16 years old as CEO, is the importance of high optimism in what we do, and do everything with conviction and deep involvement. These have been some of my most important focus areas.

As a fund manager, it is crucial to remain agile in evolving situations. There is nothing that is completely right or wrong, but at the same time you always have to take the right Due diligence for every decision you make. In addition to being work, ensuring that all your actions – analysis, interactions, meetings with management, forms convictions and make investment decisions – are supported by a thorough due diligence. As soon as you do that, you should not worry too much about short -term fluctuations, but instead remain with a high conviction.

Secondly, because we are in the capital markets, risks can suddenly arise without warning. The key is whether you are fully prepared to limit and manage those risks. That is why you must always ensure that you have risky processes, so that such risks do not hurt you. This is another area where you have to stay on top of work. If you are on the front foot during a crisis, it ensures that you can manage things effectively on the fund management side.

And last but not least – keep cool in all situations. I believe that the key remains to manage situations more effectively.

Kshitij Anand: Being agile, staying cool and staying on top of the work – absolutely. Well said. You even set an objective of £ 10 lakh crore aum. What would the growth engines be to achieve that?
A Balasubramanian: As AMC, we have been completing for 31 years in the investment fund industry. We have always been a thinker and stay. Our goal has always been to build a scale, and we have achieved that by belonging to one of the top five to six players. In fact, we became the number three fund house in the country in 2019.

One of the things we have done consistently is to expand our presence throughout the country. Secondly, we work very closely with our distribution channels, which has been a key to our success – by offering knowledge, involvement and improving skills. We also have a separate distribution -engine plan, so that we continuously offer value to help them grow their business.

Another large agenda is to increase our customer base. We currently manage around 85 Lakh unique customers, while industry generally has around 5.5 crore unique investors. Our goal is to reach more than 2 crore customers. To achieve this, we are planning to expand to markets where we are not yet present. New acquisition of the customer remains an important focus area.

With these initiatives we believe that we can reach the £ 10 Lakh Crore marking in the coming years. This will be a combination of both investment funds and our alternatives. After we have spent a large number of years in the investment fund industry, we have built up a strong performance culture. Now we are also expanding those skills to our alternative company.

The alternative companies include PMS, AIF (fixed income, equity, real estate) and expansion in Gift City to help investors invest abroad and allow NRIs to invest in India. These strategies will drive us together to the purpose of £ 10 Lakh.

Finally, people are the key. We are an established organization, but we have to keep our average age young. So recruiting new talent remains a focus area. For key positions we bring in young and talented leaders in their early 40s to bring the company to the next level of growth. This is also part of our simultaneous focus to ensure that we reach this ambitious milestone in the next three to four years.

Kshitij Anand: Good that you talked about alternatives, because I wanted to get your perspective on where you see the next part of the streams coming from. Who would make the major contribution to streams in, say, the next three to five years? Would equity, debts or alternatives be?
A Balasubramanian: I think it will be a mix of all three. Equity would remain the driver – who remains the core. Given that a large pool of income from the middle class is still underweight and is invested under equity, that cake will remain the most important driver by Sips and Core Equity funds.

Hybrid funds will also grow. At the end of the day there is a large pool of investors – if I categorize them – are conservative investors, moderate risk -people and aggressive risk -rangers. Fortunately, investment funds offer products for all three categories, and especially we offer solutions in risk statistics, supported by 30 years of an established investment strack record.

Alternates are now getting up because of the power effect, which has risen considerably considerably for the past seven to eight years, especially in the deeper parts of the country where companies have grown or companies have been sold, which generates wealth. The number of millionaires is also increasing. In addition to investment investments from investment funds, they look at alternative opportunities via AIFs, and that is something that we build up.

Thirdly, we are pretty bullish on gift city. Many investors in India want diversification. After they have fulfilled their needs through investment funds, they also want to diversify by investing outside the country. That is something we want to act as an entrance gate.

So if you look at them all, investment funds remain the core. Alternatas will meet the growing needs of HNIS, Family Bureases and Ultrahnis. Gift City is for everyone, because many investors want to invest abroad, which invests dollars. And the fourth is passive. To ensure that we offer a bouquet of products, we will also concentrate on funds-of-funds, together with hybrid asset classes.

Kshitij Anand: The AMC has been somewhat a comeback story. You have spent 30 years in the system. You have seen the ups and downs of the market cycle and the company. Can you help us understand – although I know that this could be a very long conversation – convinced, how did you really help the AMC business to bounce back and become profitable?
A Balasubramanian: Because I have a history of seeing the ups and downs, we went through these cycles in every phase. We were recently reflected back, similar to what we experienced in 2014, and also in 2002. Every time it is the power of the brand and the power of the willingness to change.

Kshitij Anand: I think agility is the word.
A Balasubramanian: Yes, agility.

Kshitij Anand: Yes, you mentioned agility.
A Balasubramanian: Agility, yes. First, there is always a need for growth. At the same time, when we grow faster, we go through a few breaks. Through these breaks you feel sad and nervous and force you to visit some of your decisions again. That is something we have done. After one or two years of challenging times we have made changes to processes and systems. Nothing is cut into stone, so we had to look at people -related changes and process -related changes again.

Sometimes old organizations also need new blood. Normally we give growth opportunities internally, but everywhere where there is a need, we also bring in external talent. The way we turned around was to bring in external talent. You have had interaction with Harish Krishnan, our co-own capacity came in. We then added a portfolio manager for midcaps. We have done the same in sales. Many of us had done sale, but when someone comes from outside, they bring new thoughts and ways to do things.

So new blood – that is something that we have added in each of the functions: sales, management, marketing, etc. Evolves everything, and what we did 15 years ago could now be history. That is why we have to reinvent the wheel and we did it with an open mind.

This has resulted in two to three things. One, about share performance – today I am happy to say that nearly 75% of our stock funds for Peer Group are averages. At the same time, we have always maintained leadership in fixed -income values, with almost 95% of our funds that perform consistently better than pear competitions. This is the result of the changes we have made, which in my opinion will help the company to bring the next level of growth.

Kshitij Anand: The next one is in fact a very interesting question. We know SIPs as a systematic investment plan, but you have called it an important plan. How did that campaign help you?
A Balasubramanian: Look, I can be proud that Aditya Birla Sun Life AMC was one of the early promoters of Sips in the country. We may not have been the first, but we were definitely one of the earliest or two.

Kshitij Anand: And we see around £ 27,000 in flowing flows.
A Balasubramanian: Correct. Secondly, we were also the first to introduce wage savings in the country, which is now called SIP salary. Earlier we mentioned the Payroll Savings Plan, now it is called Salary SIP.

The whole goal is linked to goals – everyone has goals, and those goals can only be achieved by SIPs as an investment method. So we debated and discussed how we could bring in urgency about doing sips. If I keep saying sip, sip, sip, sip, it’s fine, but it can’t cause urgency. The moment you say sip now, it brings that urgency. It’s not tomorrow, not yesterday, not somewhere in the future – it’s today. Life itself is over today, lives in the present. So SIP is now essentially about life in the present.

This campaign was intended to encourage the severity of SIPs to invest with a target-based investment basis. It also ensures that people are invested for the long term. After all, nobody talks about goals in the short-term goals of everyone are mediocre up to the long term. That is why your investments must also match the period for which you have set your long -term goals.

That’s why we’ve made SIP now. We have now even devised and created materials that continued this message with slogans like SIP. We did this about four to five years ago. Because it was a powerful campaign, we thought about visiting it again, bringing it back and continuing to emphasize it.

In fact, our SIP figures have grown. I think I called the industrial figure of around £ 27,000 crore. Today we have around £ 1,150 crore SIP flows, and this number will only continue to grow.

(Disclaimer: recommendations, suggestions, views and opinions of experts are their own. These do not represent the views of economic times)