Rajat Jain is Chief Investment Officer of Principal PNB Asset Management Company. Besides, the CIO role, he also directly manages the Principal Global Opportunities Fund. Jain joined the company as CIO in 2000. Prior to June 2000, he was with SBI Mutual Fund, the mutual fund subsidiary of State Bank of India, the largest bank in India. Jain has an experience of nearly 25 years in the asset management industry. He has over 25 years of experience in Fixed Income Markets, Credit Analysis and Structured Finance. Prior to joining Principal, he has worked with CRISIL and ICICI Bank. Jain has a degree in Mechanical Engineering from Regional Engineering College, Allahabad, and an MBA from the Indian Institute of Management, Lucknow.
Principal PNB Asset Management Company Private Ltd. is an Investment Manager to Principal Mutual Funds (a SEBI registered Mutual Funds) specialising in investment management. The company is a joint venture between The Principal Financial Group Inc. and Punjab National Bank and has been in existence since 1994. Principal is a leader in offering businesses, individuals and institutional clients a wide range of financial products and services, including retirement and investment services, life and health insurance and banking. A member of the Fortune 500, the Principal Financial Group has $456.1 billion in assets under management and serves some 19.1 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States.
Principal PNB Asset Management Company has a nation-wide presence and offers a wide bouquet of mutual funds schemes targeted towards various customer segments. The company manages assets for over 4 lakh customers, through 102 investor centres with over 20,000 empanelled distributors across the country. With a long-term and disciplined investment approach that takes acceptable levels of risk backed by solid research, we aim to create, protect and grow the wealth of our investors.
In an interaction with IIFL, Rajat Jain said, “We believe that so long as interest rates remain low, investors will be interested in investing in the capital markets.”
Excerpts of the interview:
Right now, cash inflows into mutual funds are peaking. Can you give us details about inflows into mutual funds in the coming months for the current fiscal year?
Flows into mutual funds have been driven by two types of factors; factors external to mutual funds and the ones internal to the industry. Factors external to the industry are surplus liquidity and low-interest rates post demonetisation, the poor performance of traditional physical assets like gold and real estate while both the equity and fixed income markets have done well, increased presence and reach of a good distribution network and a supportive regulatory framework. Coupled with this, the industry has gained from the presence of relatively straightforward products with customer-friendly features and good performance vis-à-vis the markets, along with good transparency. We believe that so long as rates remain low, investors will be interested in investing in the capital markets. This trend may continue for a while as we do not expect a turn in the rate cycle yet and also given that individual investors are quite underinvested in equity markets.
Which sectors do you think will be in focus in FY18?
Our portfolios are tilted to the domestic recovery theme and as such we are overweight in sectors like automobiles and auto components, cement, while we are marginally underweight in financials, we do have a meaningful position there. We think that while the pharma sector is facing challenges, gradually value is emerging in some stocks. In this market, nothing is cheap and fund managers have to be very careful in bottom-up stock selection to avoid potential errors.
How do you manage cash levels of the mutual funds? Please elaborate.
We do not keep large levels of cash in our funds. Our highest cash levels are currently in the range of 4-5%. However, as a part of risk management, we have sector and stock limits and appropriately diversified portfolios.
What regulatory changes do you expect from the Securities Exchange Board of India for the mutual fund industry?
SEBI has been a very proactive regulator and has taken many steps in favour of investors over the past years. The model is now settled and the intense competition among the mutual fund players is helping the investors by delivering products which are performing well and are cost competitive. Hence, we do not see the need for many regulatory changes.
Where do you envisage mutual fund industry's growth going forward?
We think the mutual fund industry should continue to grow as it offers a range of products to meet different needs of the investor be it capital preservation with some growth, income generation, or long-term wealth creation. These products cover a wide variety of investors with different risk tolerance levels. Also, the products are simple to understand, offer liquidity and are reasonably priced, which is a positive for the industry.