Has the number been as strong as earlier month or has it improved further?
Anthony Heredia: Yes, it has actually improved further. We have crossed the magical number of 20,000 crore as per the information I have. The SIP number for April comes in at about 20,300 crore and that is versus 19,200 crore last month, over a thousand crore increase in per month SIP.
So, the 20,000 crore SIP mark has been hit and this in the face of issues like midcaps and smallcaps getting frothy, people pulling out, election uncertainty and the issue around KYC? How have people dealt with the KYC related issues?
Anthony Heredia: The way it is with social media, sometimes the narrative gets grabbed by the extreme information. I can tell you from what I have seen in our own fund and across the industry, thanks to the efforts of the investors and the MFDs, more than 85% to 90% of transactions have been in the validated category. The number of transactions in the month of April were 6-7% higher than the month of March.
If KYC was to be an issue, then you clearly would have seen a downtick in transaction count. Amounts may not necessarily be the best indicator. It is really the number of transactions. And from the industry perspective, thank the regulator as well because they have also been pushing AMCs, MFDs, RIAs, etc, to make sure we handhold the customers. I am not saying that there would not be a set of customers who had struggles, but a very significant majority of investors, have had a very reasonably peaceful investing journey, including KYC.
I would not call KYC an issue. I just would call it for certain sets of investors, typically those who have invested maybe five years, eight years back, there is some hoops they have to cross and I think just putting your data in a validated format in today’s technology age where there is so much cyber security incidents happening is just a good thing for customers.
You are negating that point because the mutual fund industry has been knocking on the doors of SEBI saying that the KYC norms are a bit problematic, we need to change that. But the data is saying there is no impact. So, how do you address that and what is the next step with SEBI to make sure that the KYC norms are standardised a bit more and made easier?
Anthony Heredia: I can answer this from a dual perspective –MD & CEO of Mahindra Manulife, and also as the Vice Chair of AMFI. I can clarify that the industry has not approached SEBI citing issues. We have been in constant discussion with the regulator and it has actually been both of us just making sure that the journey is as seamless as possible. Obviously when you transition to a newer format, you would expect certain hiccups and making sure that those hiccups were as minimal as possible was the objective. So, the point is that if the number of transactions that have gone through are higher than any point in the last three months, if most of those transactions happen in the validated status, the focus we have as an industry and that is in sync with what the regulator expects is how do we solve and make it easy for customers who perhaps need handholding to convert their KYCs from on-hold status into a validated status or a registered status. I am just clarifying. I do not think there is a discussion around how we resolve it. It is more about how we make something pretty seamless. There are very few capital market products anywhere in the world where a customer with one KYC transacts across the fund industry. Think about the US, 500 funds, it is not as if you can invest in one and then show up at the other door. This is possible only in India and give credit to SEBI and AMFI, but the unsung hero is the MFD or the mutual fund distributor who has probably spent and burnt a lot of midnight oil making sure their customers are ready for that change. Given the transactions that we have seen in April, it kind of shows that their efforts have worked.
It is a momentous day, triumph of the retail investor in the face of all the question marks and challenges 20,000 crore SIP data is something to take note of. Just a few years back, the run rate was a few hundred crores, then it crossed 1,000 crores. So that is a milestone. How are the break of the flows looking? Last few times, we saw some shrinking of flows from small and midcaps in favour of balanced funds and largecaps. Is that rebalancing on?
Anthony Heredia: So, let me answer this from the perspective of what the numbers are telling us and what I am seeing on the ground and in some sense, they are both the same thing. For the last two or three months, there has been a clear shift away from small and midcaps being the flavour of the month to perhaps flexi and multi-cap funds being the more relevant product. But what I am also seeing increasingly is a huge interest in thematic products.
What I think is happening is that if a customer wants to get a little bit of excitement in his or her life, beyond diversified, flexicap or large and midcap funds, where over the last six or nine months they chose small and midcap, I think they are now choosing thematic funds. I would believe that over the next three or four months, it is looking like the trend to follow – flexi, multi, thematic funds. If you look at the data, you will see a lot of money coming back into long-term fixed income. So, people are taking a view that perhaps interest rates are peaking and this is not a bad time. So, probably the most diversified month of flows in a long while in the industry is obviously very good news.