Is Reliance Mutual Fund giving up the AAUM race for profitability?

Reliance Mutual Fund  is changing its strategy of chasing the AAUM, to now focus on increasing its bottomline. The AAUM of Reliance Asset Management Company (Largest Mutual Fund Manager in India) is slowly tapering off. Does this mean it has given up its self-styled race for size to now focus on making its balance sheet stronger?

Reliance the Undisputed Leader in AAUM: Reliance held the No 1 spot in assets under its management for past many years. Its was originally Reliance’s idea to aggressively market various schemes and garner biggest chunk of new assets under its control. It launched innovative products, schemes and offered large incentives to market its funds. It redefined the Indian Assets Management business by taking a sizeable lead ahead of its rivals. With sustained efforts and aggressive posturing it reached indomitable position in the Indian Mutual Fund Industry in a very short time.

Knowledge, Products, Marketing and Timing: Reliance Group has a firm understanding of the Indian Markets. It has always kept pace with the changing demographics of its consumers. In one of the fastest growing market of the world, it is of utmost importance to connect with your investors and stay ahead of the curve. SIP for just 100, ATM Card for Mutual Fund Investors, First SIP in Gold Fund are few recent examples of innovative concepts by Reliance Capital.

Reliance Mutual Fund

Good management, excellent and timely PR, stable fund managers are a few qualities associated with Reliance Mutual Fund. It managed volatility and downtrends in markets with gusto by being in the public eye when it mattered the most. Able Fund Managers were available in public domain(effectively and efficiently doing a  Public Relations job) to calm investor’s nerves when their portfolios were bleeding. Such hand holding is often the need of the hour in volatile markets.

Rivals made it easy for Reliance: While Reliance was in race with itself, others like HDFC Mutual Fund had different ideas about the whole concept of increasing the AAUM. It regularly doubted Reliance claims of ever-increasing investors and assets. The measurement of company’s size is a difficult task in a complex Indian financial market. Absence of clear and strict guidelines to calculate various parameters of AAUM made it easier to tweak numbers. Rivals were left with playing the catch-up game to the market leader, Reliance. Many asset management companies, baring few like Quantum AMC and Benchmark AMC failed to offer a different product than the one which Reliance already had in its portfolio.

The product managers at rival AMC’s were no match with aggressive launches of Reliance. Right from conceptualising an interesting investment theme/product, to launching the same in fastest time. It sounds similar to stories from other industries like automobiles, mobile phone markets. It is of equal importance to have a scheme in your portfolio before your rivals offers the same. Many AMC struggled to generate consensus internally, on themes which were relevant in the market. And by the time, when eventually some consensus would have been made, the markets would have lost 1000-1500 points. Many could never get schemes which were good at the perfect time to capitalise on sentiments. It resulted in many businesses being sold off or transferred and no real consolidation was ever strong enough to challenge its leadership.

Recent AAUM numbers of Indian Mutual Fund industry do make a point that Reliance is no longer pursuing the AAUM game. Reliance AAUM has not increased in past few quarters and to make matters worse it has in fact decreased.

Investors would be hoping that the Leader of Indian Mutual Fund Industry is pausing, only just, to take a bigger leap forward.

 

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