Long road ahead for growth

It is not the best of times to be in the chief executive’s seat at an asset management company. Money has been flowing out of equity schemes — the cash cows of a fund house because of their high margins — for a year now. Debt schemes have not fared any better. Total assets under management (AUM) of the industry have declined.

So it is not small feat when a fund house manages not only to grow its overall assets, but also improve its market share of equity assets in a tough year. Passed over for the top job once before, A Balasubramanian, CEO of Birla Sun Life Asset Management, has had an eventful first year in the corner office after taking charge last August.

In the past 12 months, Birla Sun Life’s AUM has grown a little over 7% to around 62,000 crore. But more importantly, equity assets have grown 50% to around 12,000 crore. Equity assets now account roughly 20% of the total AUM, compared to around 16% a year ago. Only HDFC Asset Management has reported a bigger rise (+57%) in its equity assets. In comparison, total equity AUM, across fund houses, have been flat over the past one year.
    
Strong performance of Birla’s key equity schemes such as the flagship Frontline fund, Midcap fund, and Tax Relief 96 have helped. Also what has helped is the fund house’s decision to concentrate on fewer schemes, and make them the best performers in their category. The fund house now claims to have 24 lakh investor accounts, compared to 17 lakh last year. All these numbers are reflecting in the fund house’s full year numbers.

For the financial year ended March 31 2010, Birla Sun Life Asset Management reported a profit before tax of 62 crore, compared to around 9 crore in the previous year. Industry officials say there has been some reshuffle of key positions within the fund house.

Employees, who were seen as deserving, were given more responsibilities, and along with it, stiffer sales targets. Rivals say the fund house has become more aggressive over the past year. For now, Bala — as he is known to friends and colleagues — has come out smelling of roses.

But the path ahead is likely to be challenging for some time to come, largely because of the issues facing the industry. Ever since Sebi scrapped entry load for equity schemes since last August, inflows into equity schemes have shrunk considerably. This despite the fact that the stock market has been on an uptrend for the past 12 months.
    
Some rivals snipe that what has partly helped Birla Sun Life grow its assets is also its “aggressive” distributor commission policy. And despite the ground covered in the past 12 months, Bala will recognise the fact that his fund house still has a long way to go in terms of growing its equity assets.

Overall, Birla Sun Life is fifth in the pecking order in terms of average AUM. But when it comes to equity assets, the fund house ranks seventh, with fund houses like SBI Mutual Fund and Franklin Templeton ranking above it.

“It is early days yet, but Birla’s moves will be closely watched by the top three players now that it is showing a renewed aggression to narrow the market share gap,” says a rival fund manager.