Informist, Monday, Oct 4, 2021
By Ajay Ramanathan and Shreejit Nair
MUMBAI – With regulatory approvals to acquire YES Mutual Fund in place, White Oak Capital Management plans to start mutual fund operations in Jan-Mar, says Chief Executive Officer Aashish Somaiyaa.
"The board composition, and multiple other procedures... everything would be in place in the next four to six weeks," says Somaiyaa in an interview to Informist.
In September, GPL Finance and Investments Ltd, a subsidiary of White Oak Capital, had received the Securities and Exchange Board of India's approval to become the sponsor of YES Mutual Fund.
In August 2020, YES Bank had announced sale of its entire stake in subsidiaries YES Asset Management (India) Ltd and YES Trustee Ltd to GPL Finance.
YES Mutual Fund currently has three schemes--liquid, overnight, and ultra short-term debt funds--with assets under management of around 215 mln rupees as of Jun 30.
Somaiyaa, who will now head the mutual funds business, says the fund house will be purely retail-focussed, and it will start operations by launching diversified equity funds.
"We will look to launch diversified equity funds first, which is closest to our style of management because if you see White Oak as a house, we are sector-agnostic and market-cap agnostic," he says.
The fund house, he adds, will also invest heavily in building the distribution channel. He expects to build up presence across the country in the next 12-24 months.
"We will do everything that is required to be a material player over the next five years."
Following are edited excerpts from the interview:
Q. What is the thought behind acquiring the mutual fund operations from YES Bank and by when do you expect the transaction to be completed?
A. In terms of timeline, we can close the transaction and that would take maybe another month or so. The board composition and multiple other procedures...everything would be in place in the next four to six weeks. On the launch of funds or get into the market, maybe you can imagine in the first quarter of the next calendar year.
We have an investment team with 20-22 equity professionals. As far as YES AMC is concerned, its sponsor YES Bank came out and said it would look to exit the AMC business, and that's when we decided to acquire it because we were always keen to get into mutual funds as a retail offering. They got their licence in 2018 and as we speak now, there is a team in place, there are systems, processes, everything in place. Maybe, we can build further on what they have already done.
Q. How can you leverage your expertise in portfolio management services and alternative investment funds in the mutual fund space?
A. We will look to launch diversified equity funds first, which is closest to our style of management because if you see White Oak as a house, we are sector-agnostic and market-cap agnostic. As a result, our first approach would be to create domestic equity funds with a multi-cap, flexi-cap, large- and mid-cap, mixed market capitalisation kind of strategies. In the future, we would also like to create global funds because we have that capability within the team. YES AMC already has some fixed income offerings, so we will eventually look to build on those fixed income offerings as well. Sequentially, it should be domestic equity, global equity and then hybrid, multi-asset and fixed income.
In terms of the distribution mix, we will target every channel, be it digital, independent financial advisers, national distributors, or banks. Because we have been offering PMS and AIFs, we do have some relationships.
Q. Will you look to close down any existing products of YES AMC?
A. Even for equity-oriented funds, we need fixed income products to complement that. A lot of times, people put money in a liquid or an ultra short-term fund and then switch it into equity. Second, since interest rates are very low right now, across the industry, liquid funds and overnight funds are giving low returns because the level of interest rate itself is low. I think over a cycle, they do give market-linked returns and offer a lot of convenience. So, we should definitely continue with these products and build further on them.
Q. Would you largely focus on the active fund management space and not passive such as some new-age financial technology players?
A. We will be purely in the active space. If you see the new players coming in, their background is distribution, not investment management. Distribution is also an absolutely essential competency to build an asset management business, but our background is investment management.
Q. How are you building your investment and sales team in the fund house?
A. We already have a pretty large investment team. We are in the process of creating a mutual fund team. As far as sales and distribution are concerned, we will establish country-wide presence and have a full-fledged retail presence across the country.
Q. Will you target retail money alone or also look at institutional funds to grow assets?
A. Whether it is fixed income or equity, our focus will be on retail. If you give yourself five years and build an entire retail base, I think that is good enough.
Q. What are your plans for going beyond the top 30 cities, given that you are targeting retail money?
A. We will build branches across these locations. In the next 12-24 months, we would like to build presence across the country through our sales team and our branches. We would have tie-ups in the digital ecosystem.
Q. What is the extent of capital White Oak Capital has set aside for these investments?
A. That is difficult to forecast right now; suffice it to say that we will invest in a big way. For the first three to four years, we are happy to invest. Even for branch presence, we will not hold back. We will invest and build our presence even in the B30 cities.
Q. What are your growth targets in terms of AUMs in the next two years?
A. The AUM depends on what kind of reception or what kind of acceptance you are able to get from distributors and, more importantly, from investors. Second, it depends on market conditions. Third, it depends on our own fund performance and execution. We will do everything that is required to be a material player over the next five years. End
Edited by Avishek Dutta
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