Born to a diplomat father, Radhika Gupta moved different countries along with her family every three years. Starting her career in 2005 at McKinsey & Company as a Business Analyst in US, Gupta along with Nalin Moniz and Anant Jatia decided to take the entrepreneurial plunge by moving to India. They founded Forefront Capital, one of the first AIFs in the country, which got acquired by Edelweiss Financial Services in 2014. In 2017, Gupta took charge as the CEO of Edelweiss Mutual Fund. Gupta shares her learnings as an entrepreneur and how she is steering the mutual fund business.
You came to India at the age of 25 to start a fund house after quitting your job at job at Wall Street. Tell us what inspired you to move to India?
I moved back to India at the age of 25 to start Forefront Capital. We were willing to take decisions on the spur of the moment. I don’t come a background of business family. But there was a desire to come back home and bring some new ideas in the market. All the three partners who founded Forefront Capital hadn’t lived in India before. It was an experiment. We had to figure the regulatory set up. There was no Alternative Investment Funds (AIF) regulations at that time so we launched it as Portfolio Management Service (PMS).
How did you research about the Indian market from US?
The only research we did from US was going through the Securities and Exchange Board of India (SEBI) website. At that time, PMS seemed flexible to do what we wanted. We started writing to SEBI from US to figure out where we fit in. When we came to India, we realized it was very different. India is a difficult country to run a business. The challenge was not investment management. In asset management, investment management is just one function of the business. There is sales, marketing and compliance too. We didn’t know anything beyond managing money. The biggest challenge was convincing clients why they should entrust their money with us. Nobody was rushing to give money to three youngsters who had come from Wall Street. We started the business with Rs 25 lakh assets. Scaling it up was a long journey. We could not do direct sales; we needed distribution support. We learned these things on the fly. We were the first firm in India to get Category III AIF license. In fact, we were actively engaged with SEBI for forming the AIF regulations.
You have lived in four continents. How has this experience helped you in your career?
I think it is an experience everybody would want to have. It is very different to live in a country versus to travel in it. When you travel, you go to glamourous destinations. But we lived in less glamourous countries like Nigeria, Zambia and Pakistan. When you live there you have to adapt to the school system, local customs and tradition. Its immersion versus holidaying a week in a country. This experience taught me to be flexible which has helped me professionally. I’m very comfortable with change and learning to adapt with new kinds of people. It gives us an agility which is essential for the workplace.
What have been your learnings as entrepreneur?
Entrepreneurship teaches you that life is not easy. If you are resilient you get through. It is a great learning in capital markets profession because markets are turbulent. My big learning is not giving up and having perseverance. The other thing entrepreneurship teaches you is that you can often complain about external environment but there is a lot you can do yourself no matter how much negativity is around you. Entrepreneurs are trying to make it big in an industry they are new and opposed. It applies to distributors as well. There is always a market for quality work. If you don’t focus on external environment, you will do well.
You earlier worked in the AIF space and now you are heading a mutual fund firm. How different have been both experiences?
I don’t think there is huge amount of difference between AIF and mutual funds space. The principles of good money management remain the same. In AIFs, you are doing strategies that are more complex in nature. In mutual funds, the choice is simple, and the customer base is retail. It forces you to think of simple solutions and how we can reach out to more customers. In AIFs, we don’t put that much emphasis on marketing. There are great lessons that hedge fund and AIFs can learn from mutual funds.
What can AIF industry learn from mutual funds?
Simple communication. In AIFs, there is a lot of complexity in products. In mutual funds, all players have the same products. Yet, we find ways to differentiate. The mutual fund industry has done a wonderful job of creating a simple feature like Systematic Investment Plan (SIP). The other learning is governance. Mutual fund Net Asset Value (NAV) has a lot of sanctity. The excellence in reporting standards is something AIFs can adopt.
What changes have you brought about after you took charge of the mutual fund business?
From 2.5 years, we have expanded the business. From being a boutique business, we have become mainstream. One of the big endeavors has been to keep the product basket simple. SEBI’s streamlining of products has also helped. A lot of effort has been put into enhancing marketing and communication. The second effort has been to grow the team and distribution network. Two years ago we had around 500 active IFAs working with us. Today, we have couple of thousand IFAs doing active transactions with us. Also, we have increased our branch strength to 25 locations.
Tell us more about your Advice Zaroori Hai Campaign. What was the objective of starting this campaign and what has been the feedback?
When we talk to investors across the country and ask them why they don’t invest in mutual funds, the answer they give us is that they don’t have a good financial adviser. They don’t know where to find an adviser and whether to trust them. We are often asked in Investor Awareness Programmes (IAPs) which funds to invest in. We can’t answer this question. We tell them to consult an adviser. Advice is important in all domains of life. You go to a doctor for advice, a Chartered Accountant (CA) and a coach if you are an athlete. Then why not consult an adviser if wish to invest? That was the genesis of the campaign. To make people realize that they need advice and also to showcase the work of advisers. We celebrated Independent Financial Adviser (IFA) Day on March 31st. The idea was to tell investors to take advice. We started with an outdoor campaign in different cities by featuring advisers on billboards. We also run a digital campaign. We are just partnering with JOSH Talks to release an Independence Day campaign around Advice Zaroori Hai. In these campaigns, we are showcasing stories from armed forces and how they have benefited from advisers. These are real life stories.
What would be your advice to distributors who are reeling under the impact of squeezing margins?
It’s been a tough journey for distributors lately due to a combination of tough market conditions and a change in regulatory regime. We easily write off the future of the industry because of a tax change, entry load ban, or a regulation change. But the industry has survived all these changes and only grown. I always tell advisers that they live in a country where mutual fund to GDP penetration is 5% while the world average is 40%. Your opportunity is between 4% to 40%. When we conduct IAPs, we realize that 50% of the audience who are well educated don’t invest in mutual funds. The opportunity in front of advisers is vast. The short-term changes will tide over. Focus on getting new investors. The volume will take care of the headwinds. Look at the growth of your business in the last ten years. Compare where you were ten years back and now, you would be much happier. They could have never imagined they have come this far.
What new initiatives is the AMFI committee on Certified Distributors planning for distributors?
We want to be a lot more inclusive. I often get this feedback from distributors that there is no one to listen to them. We want to be more open to the feedback of distributors. We would like to meet different IFA Associations every quarter.
Besides, we want to make effort to increase the distribution force. Our country needs many more advisers if we want to achieve true financialization and we are here to facilitate that. AMFI is working on a project, which is outside the periphery of this committee, to bring new distributors in the industry. Two Directors on AMFI board are chairing that project. They are taking feedback from distributors on what can be done to bring more distributors in the MF fold. They are also mulling of improving the training quality for distributors.
One thing I would like to see is that there should be more focus from AMCs and SEBI on how to retain advisers in this industry and attract new advisers. Distributors catering to retail investors need to have a sustainable source of income. We need to ensure that retail investors get the services of distributors. When we celebrate IFA Day on March 31 next year, it would be great if all AMCs come together to support the initiative rather than Edelweiss doing it alone. The industry needs to recognize the fraternity that has helped them come so far.
