Radhakrishnan Chonat: Good day, ladies and gentlemen. Welcome to another episode hosted by AlphaStreet India’s YouTube channel, where we bring you insightful interviews with prominent CXOs from the investment management world. And today, I have the privilege of hosting Mr. Akhil Chaturvedi, the Chief Business Officer of Motilal Oswal Asset Management Company in India. With a remarkable career spanning over 22 years in the financial services industry, Mr. Chaturvedi brings a wealth of experience and expertise to his role. Currently, he is responsible for overseeing sales and operations, products and business development at Motilal Oswal AMC, and he plays a very pivotal role in shaping the company’s growth and strategy.
Prior to his current position, Mr. Chaturvedi has held the esteemed position of Head Retail Sales at Daiwa AMC and has been associated with prominent organizations such as Birla Sun Life Mutual Fund and Birla Global Finance Limited. He holds a master’s degree in business administration as well as accounting and finance from University of Leeds, UK. Throughout his career, Mr. Chaturvedi has been instrumental in driving the business growth, implementing effective sales and marketing strategies and delivering innovative investments product. His expertise spans a wide range of investment products, including Mutual Funds, Portfolio Management Services, and Alternative Investment Funds.
So today, ladies and gentlemen, it’s a privilege to try to gain insights from Mr. Chaturvedi about the mutual fund industry in India, his experiences over the years and his perspective on the future trends and challenges in this field.
Join me in welcoming Mr. Akhil Chaturvedi as we delve into engaging conversation about the fascinating world of mutual funds in India. Thank you, sir, for agreeing for the interview.
Akhil Chaturvedi: Thank you, Radhakrishna ji. Thank you so much for the opportunity. Look forward to talking with you.
Radhakrishnan Chonat: Excellent. To begin with, from your vantage point, can you share some insights on the current state of the mutual fund industry in India and how it has evolved over the years? Because you’ve been part of this industry for a long time, so if you can share some insights, that’d be wonderful.
Akhil Chaturvedi: Yeah, thank you. So I think we are in a very exciting phase of the mutual fund industry business per se. I’ve been associated with this industry now for over 20 years, when I started my career with Birla Sun Life mutual fund. And vividly I remember we were back in 2001, 2002, industry was all about under a lakh crore, and from there, we have reached almost 45 lakh crores. So, in the last two decades, more specifically, I think this industry has grown quite rapidly; it has lived through all the ups and downs, all the market cycles, all the good news, all the bad news. And over this timespan the industry has worked very hard to get new investors to invest through mutual funds for wealth creation, wealth preservation, innovative concepts such as SIPs have become a household name, and a lot of investors are benefited by doing SIPs to achieve their long term goals. So this industry, 20 years back, I remember, we used to say that it is a sunrise business and as the economy will grow and investor’s appetite towards equities will increase, there is a lot of wealth amongst the Indian investors, right? So this business can become really multi fold. I would say that the industry continues to be a sunshine industry or sunrise industry for that — from that perspective. I think we are still scratching the surface.
If you see, overall, household assets today is about 800 lakh crores. So all Indians owning real estate, gold, equities, fixed deposits, all these things, if you put together it is about 800 lakh crores. That’s the kind of household assets. Today, what we see is 4.8% penetration in equities, which is very, very small. Although we have doubled in last five years, but I think if you see some of the developed markets, you would see 40%, 50% households are investing in equity. So from that perspective, we have miles and miles to go. And it’s going to be very, very exciting. India offers a great, great opportunity. India as an asset class itself is looking very exciting. And within which all those who will participate in equities through mutual funds, thorough SIPs, I think there is enormous wealth to be created over a period of time. So it’s going to be a very exciting journey going forward as well.
Radhakrishnan Chonat: Excellent. You mentioned the percentage of assets in equities, direct or via mutual fund is just short of 5%. And mutual funds offer a wide range of investment products in India. Now, it’s also seeing a lot of new AMCs enter, and it’s a big field, 44 plus AMCs. So in this highly competitive field, what are some of the unique or innovative products offered by your AMC, Motilal Oswal, that is differentiating you from your competition?
Akhil Chaturvedi: Yeah, thank you for the question, very interesting question. You’re right, it’s a — there are a lot of players in the industry and I’m sure, going forward, number of players only will increase because the opportunity size is very, very large. Now, as that happens, obviously, every AMC has to be uniquely positioned to offer some kind of value proposition to the investors. And if we can offer the right value proposition then obviously, we will attract investors, we will attract our partners and that will help us get growth. We started building this business, more specifically Motilal Oswal AMC, since 2013.
So prior to 2013, we were very small, niche player, more on the PMS side, and most of our investors were in-house, more on invitation basis, we were very, very small. 2013, the strategy was to go out and build our distribution, build our investor base, build our mutual funds. And when we were strategizing at that point of time, back in 2012, 2013, clearly we wanted to be positioned as a unique AMC. We wanted to be a boutique offering to investors. And we didn’t want to do too many things; we wanted to do a few things and try to do the few things as good as possible, as better as possible. And in long term then create a huge value creation for the investors.
So, our positioning, if you see is around equity as an asset class. Now given our legacy of our group, and our chairman, Mr. Raamdeo Agrawal is four decades of investing experience in equities. And through his investing journey, he has created or he has written 27 wealth creation studies, and all of these led to creation of our unique investment philosophy, what we call as QGLP framework, so Quality Growth Longevity Price. So we had a investment philosophy in place, we had four decades of equity investing in place, we combined both of these things, and we took it out to our partners and investors with this value proposition. And fortunately, right philosophy, right process also led to right outcomes, which helped us get a lot of acceptability and growth. So, from being a virtually no player in the industry, we are in the top 15 right now.
So, we continue to be positioned as a boutique AMC around equities as an asset class, within that single philosophy of QGLP. And within that, we do very few products. So, that is another very distinguishing factor, we don’t have too many products. So, we believe in less is more and even less is even more.
So if you see my active products, we have basically products based on market capitalization. So we have a mid-cap, we have a flexi cap, we have a focused product, and then we have solution products, that’s about it. So few products focus on long term performance. And industry is such that if you do a good job in terms of giving good performance, growth will automatically come to you.
So, just to summarize, we are basically equity players, we do equity products, buy and hold philosophy, QGLP frameworks, and therefore you will see that we don’t have debt products, we don’t have many things which some of the conventional AMCs might be offering. So, this is our positioning.
Radhakrishnan Chonat: Excellent, excellent. So just segueing a little bit, when it comes to the financial planning, we mention that Indians still prefer real estate and gold as a higher proportion of asset class and slowly, though our population is huge, the addressable market is huge, there is still less than 5% penetration. So you also have a professional degree in financial planning. What according to you has been the investor’s risk appetite over the years? And what probably, if I were to ask you to visualize what would be a good wish list for you were from 5% it grows up to what we have, as you mentioned 40% to 50% penetration. So what are the factors that are limiting the investors and how do you plan to address those risks that — perceived risk that they have with this asset class?
Akhil Chaturvedi: So good question Radhakrishnan ji. I think a lot has changed in the last seven years, more specifically after demonetization. If I just have to put a timeline, 2016 is when the demon happened, and 2017 was probably one of the best year we saw the highest inflows in the mutual funds, including SIPs. Now, I don’t know what happened at that point of time, something changed and from that point onwards, and more specifically, then coming into the COVID situation where post-COVID also we have seen a lot of interest of Indian investors in equities, we have seen the kind of Demat accounts which have opened and the mutual fund corpus also has been or the AUM has been growing ever since 2017, escalating more towards a post-COVID kind of situation.
So I think what’s happening is from a risk perspective, investors have understood now that given that in India, in long term, the interest rates eventually will only come down and in low interest and a inflation which could hover between 4% and 6%, the real return could be plus 1% minus 1% because that’s your real purchasing power. And if you are going to invest in products, which will give you a 1% purchasing power, then obviously, we all know that in long term one will not be able to achieve their financial goals.
So people have started to understand that and we have a young population, we have a lot of young people coming into workforce, they are ready to — they understand all these things, they are ready to take risks, they are ready to invest, and therefore, we are seeing a very good healthy growth of investors coming into mutual funds. Risk appetite also has increased. Mind you that the share of equity, which is today 5%, was 2.5% five years back only. So it has all happened in five years. And the pace of investment is not coming down, it slows down in times and it goes up in times depending on market movements. But if you see the SIP number, it is just going one way up, right?
Now we are close to INR15,000 crores, almost close to $1.8 billion is a recurring inflow of retail investors into mutual funds. So, I think incrementally, I don’t doubt that investors will not look at equity as a good asset class for long term wealth creation. And we will see new investors coming in with lot of efforts of regulator and fee, all the asset management companies, our distribution partners, all of them are single focus, single mindedly working towards getting more and more investors. The opportunity is huge.
See, today we have unique investors, unique plans. We have population of 140 crore people. Let’s say a relevant universe of, let’s say, 25 crore, 30 crore people, and then we have only 3 crore people who have actually — unique 3 crore people who have actually invested in mutual funds. So you can imagine, with a lot of focus and hard work, this 3 crore can go to 6 crores and 10 crores. And this 5% market share today could easily double in the next 10 years or so. And every percentage movement from household assets into equity will mean a movement of 8 lakh crores. Because 800 lakh crores is your total household assets, every percentage moving from there to equities is movement of 8 lakh crores. So, now you can imagine, 5 into 8, 40 lakh crores. 40 lakh crores, current mutual fund basis, 45 lakh crores. I feel that equity AUM itself in 10 years can be 100 lakh crores.
Radhakrishnan Chonat: Excellent, excellent.
Akhil Chaturvedi: Right. So, that’s the excitement I can tell you, that is the opportunity I can tell you with which all of us are designing our business models, and all other strategies to basically get more and more investors to participate for long term wealth creation. I’m sure everybody wants to get rich. So, you get rich only in long term, you don’t get rich in short term. That is only luck. So that’s the thing.
Radhakrishnan Chonat: Excellent. You mentioned regulation and as the economy is getting formalized, the financial services industry is highly regulated, right, in a good sense. And SEBI has been a very active regulator off late from my viewpoint. And I think they have recently come up with the standardization of investor fees and all that stuff. So, while you have to ensure compliance with all these regulatory requirements coming in, how are you also planning to ensure that you’re — the current traditional business model is growing at the same time, as you said, you have a lot of leeway for innovation and there is a huge untapped market potential. So do you see this as a good to have regulation or are there any concerns from within the broader industry?
Akhil Chaturvedi: No, I certainly believe that regulation is very, very important, especially when it comes to retail investors. A lot of retail money when it comes to any ecosystem, you definitely need a very strong regulation to ensure that the minority interests are taken care of.
If you go back in history and see what happens in any industry, when regulation or regulator comes inside, what we see is that, after 1992, when we saw SEBI getting more active in capital markets, since then, our stock markets, mutual fund business, all the businesses under SEBI have flourished and they have grown. And from time to time they have tweaked the regulation, they have tightened the regulation in the larger interest of the industry and protecting or safeguarding the industry from various risks which can come from time to time.
Reserve Bank of India has done a phenomenal job in terms of managing risk from banking perspective. So we have been through the global financial crisis and the entire international community actually congratulated Reserve Bank of India in managing the global financial crisis. We have been through COVID, I think phenomenal job done in managing the liquidity during the COVID times. Again, we got a thumbs up from the international community, right?
So regulation, especially in India, regulators are, I think they’re doing certainly a very good job. And whenever regulations are there, regulations will change, from time to time tweaking will happen. In short term, it would create some disruption, some slowdown in the business can happen, but then in the long term, things kind of play out well. So from that perspective, you see also now, in real estate, now there was no regulator in real estate. A couple of weeks back we got RERA, and now you can buy your dream home or your office or anything you want, property, which is under RERA, you are pretty much assured that you will get your apartment or you will get your money back. So the crooked builders are now out. And the good builders are now in and within a defined regulatory framework, they have to initiate their project and complete their project and deliver the goods. So now buying a house is very comfortable if you’re buying a RERA certificate project.
So, now you see, after that has come, real estate is also booming, stock markets are also booming and our banking system is also doing very well, right? So we have to take this in a positive light. All they are doing is for the good of the industry. And they are also giving opportunity if you come back to my – our business of asset management. Now, mutual fund is a mass retail vehicle. So obviously you need tighter regulations out there. But they have given us platforms like Portfolio Management Services, or Alternate Investment Funds where savvy investors, Ultra HNI family offices, who want to take higher risks, want little bit of a flexible framework. They can participate through the PMS or the AIF platforms, right? So the regulator is also giving you opportunity to grow more boutique kind of managed products through the alternate route. At the same time, you can continue to build the retail business through the most convenient and the most acceptable vehicle which is the mutual funds.
Radhakrishnan Chonat: Make sense. Agreed. So, as the Chief Business Officer, I’m sure you have a bird’s eye view of the distribution part of reaching this mass retail, outside of the top 30 cities as they say. So now, there is an increasing popularity of digital platforms, as you said, youngsters are more comfortable in using technology or through mobile phones, apps stuff. And then there is the traditional MFD model. So, from your vantage point, Akhil ji, how is Motilal AMC embracing these new trends coming up, while at the same time making sure that the traditional model also — so what kind of a, I would say, what kind of a percentage you have in the traditional versus new distribution model?
Akhil Chaturvedi: Yeah, so the new digital models have just come around in the last five years or so. And they are getting very popular and they are quite well accepted. And we’re seeing a lot of new investors which are coming through the new age distribution channels which are more digital, but it will take them — obviously it will take them time for becoming the large disruptors to the traditional model. So I would say that both the conventional MFD space and digital both will survive and thrive because the opportunity, as I said, is huge. There would be certain set of DIY investors who will just download the application and buy a bundled product through the digital platform and that side will grow. And I think most of the digital channels are actually trying to create new markets rather than eating into the already prevailing market.
So actually they’re just helping create more awareness and get more investors and popularize a lot of concepts like, international investing was very popularly advised by the digital channels. I think that channel became very, very large in terms of the international allocations or passive products, domestic passive, so, low cost passive realization products, that is all the things which is working on the digital. Whether it’s conventional mutual fund distributors is all about personalized relationships, managing families for many, many years and decades and being more like family members, more personalized discussion on which product to buy, not buy etc.
So, you have all kinds of investors, right? So, you have several platforms available. And one can choose to whichever platform one feels comfortable. And personally if you talk, I have some allocation through digital channels. When I want to buy simple products, I would through the digital channels, and when I want to buy Alpha oriented products, I need some guidance, then I go to distributors. So I have allocation in both. So if that is some guidance I can give you in that way.
Radhakrishnan Chonat: Excellent. Now, coming back to you, individually, what has been — if I were to ask you to share a success story or a notable achievement of your journey so far, what has been the most satisfying so far in your journey?
Akhil Chaturvedi: That’s a — it’s a difficult question for me to answer. It’s a — it’s been a good journey, honestly, been in this business for, like I said, over 20 years. It’s been a — it has been a very satisfying journey to see that how this business has grown, the industry has grown, how our stock markets have grown and all the evolution, the technology. And it’s not done yet. So, I feel that, I mean, we’re still, as I said, scratching the surface and the opportunity size is huge.
So it has — it’s been fun building this business, whether I was in Birla Mutual Fund, which was a very large player than it is a large player now. Then I went into a startup, which was a Japanese sponsored mutual fund called Daiwa Asset Management. So that was a different experience, because it was a startup, I was one of the founding members, and unfortunately, we had to wind down as well. So I’ve had that experience of starting up and closing down as well.
And then, ever since I’ve been in Motilal Oswal, obviously building this organization from just about INR1,000 crores to now INR50,000 crores. So it’s been a mixed journey of ups and downs. But at the end of the day, like you say that, if you invest in the industry, then the industry pays you back. So I feel that I’ve chosen the right industry, I love working with our distribution partners, I love to engage with investors, in good times, and in bad times. I learn a lot from distributors and investors. So that’s a
continuous — that continuous critical feedback is what helps you improve and think about the larger picture. So, it’s been — that’s the journey I’ve had, honestly.
Radhakrishnan Chonat: Excellent. Again, sticking to the personal theme, how do you spend your quality time outside of your work, when you’re not thinking about expanding your business? How do you cool off, if I may ask?
Akhil Chaturvedi: So I do enjoy exercising. So ever since 2009, if I’m not mistaken, I was not that much into fitness all that stuff, more into work and — work and enjoyment and all that stuff. And — so didn’t have a very healthy life, body was not supporting, weight was going up and all that stuff. So 2009 is where that was — that wake up moment and I started to get into running, diet and all of those things. And since then, I think there have been many, many years I’ve done running. I do a lot of functional training. I do a lot of swimming, cycling.
So I love sports, I target 45 minutes to 60 minutes of some workout on a regular basis, at least three to four days a week, if I can achieve that, because I travel a lot. And beyond that, obviously spending time with family and going out small vacations, small, small things.
If my wife hears all this, I don’t know how much she will agree with me or not. But at least the endeavor is that these are small things. But life has been very busy, honestly, last couple of years. Since COVID, it’s been very tough. So not getting time to do too many things, which I would love to do, but hopefully soon, we will get back to that.
Radhakrishnan Chonat: Excellent, excellent. I’m going to make sure this interview reaches your wife.
Akhil Chaturvedi: Yeah. She’s going to say that you were lying.
Radhakrishnan Chonat: No, no. So before closing, this is something that I ask all my guests. If you were to recommend any books for my listeners, if you can pick three books from all the books that you have read so far or that you would highly recommend for the audience, what would it be?
Akhil Chaturvedi: Yeah, so I mean, there are plentiful of books. So I can give you three tips. One, to understand investing, how to invest and behavioral finance, I would suggest one of the recent books, Psychology of Money. That’s a very interesting book, one should read. I made my kids also read that book several times. If you are into the world of business and building business and you’re into sales, then I would certainly recommend this book called, Ultimate Sales Machine by Chet Holmes. It’s a nice, very nice book. It will give you a lot of insights into building business and how to improve your sales skills. And finally, again, for those who are in business and it may help you also personally, I like to read and follow Simon Sinek. Now there is a very popular YouTube of his, which is available on YouTube now. You can just simply type Why, How and What by Simon Sinek. Just hear that multiple times to understand what he’s trying to say. And on the same thing, he has written a book called Why, How, What.
These three things are — apart from many books I follow, but these three are like, I would certainly recommend everybody to follow, go through and come out with insights, write those insights and try to put it into practice. See reading is one thing, learning is one thing, but putting into use is other things. So I would say read less, but whatever you read, try and learn something from that and try and execute that. Otherwise, reading 100 books, 200 books doesn’t make any sense.
Radhakrishnan Chonat: Excellent, excellent set of book recommendations. Definitely, I’m a big fan of Simon Sinek myself. So, I should have started my interview with, start with why. So excellent. It’s been a pleasure talking to you and getting to know about Motilal Oswal AMC and the mutual fund industry in India in general. I look forward to many more such interviews and picking your brain. Thanks for your time.
Akhil Chaturvedi: Thank you, Radhakrishnan. It was absolute pleasure talking to you. Look forward to more such conversations in future on different topics.
Radhakrishnan Chonat: Yes. This is just the beginning.
Akhil Chaturvedi: Absolutely.
Radhakrishnan Chonat: We’d start with Why next time. Thank you. Thank you for the time.
Akhil Chaturvedi: Thank you very much.