In one of the biggest people moves in the mutual funds AMC business, HDFC Asset Management has hired Navneet Munot of SBI MF to join them as MD & CEO.

The Board of Directors of HDFC Asset Management at its meeting held on November 16, 2020 approved that Navneet Munot will be appointed as Managing Director & CEO of the Company and he will succeed the present Managing Director, Milind Barve.

Barve, a career ‘HDFC man, is 63 and is retiring. Known for his conservative approach and building a massive retail base for the fund-house, Barve oversaw many changes in the company and got it listed too. Simply put, Barve built HDFC MF into a credible franchise over two decades, and this was driven by Prashant Jain, the investment boss at the company.

Munot’s move

SBI Funds Management is the largest fund house in the country, managing assets of over Rs 4.5 lakh crore. In doing so, it has recently topped HDFC MF as the AUM leader. HDFC MF has an asset base of Rs 3.75 lakh crore.

Munot is going from Number 1 AMC to No 2. This is not exactly a demotion, because Munot gains the MD & CEO post at HDFC AMC. SBI Funds Management, which runs SBI MF, usually appoints SBI senior officials as MD & CEO. So, it would have been very difficult for Munot to ever be the leader at SBI Funds Management if he had that ambition.

Investment expertise

While Munot lacks the ‘corner room’ experience, he is obviously a very capable leader in the asset management industry. Rising through ranks from a manager of fixed income to hybrid to equity to CIO and now to CEO of very reputed AMC, Munot will not be the first or the last investment oriented professional to don the hat of CEO. Nilesh Shah of Kotak AMC, Radhika Gupta of Edelweiss Asset Management, George Joseph of ITI MF etc. are live examples.

The royal crown for Munot comes with its own thorns. One, the culture of HDFC AMC is distinctively different than at SBI. Anyone who says its similar, isn’t speaking the whole truth. So, Munot has to immerse himself and be on top quite quickly.

Two, HDFC AMC is a listed company and the stakes as well as scrutiny will be much more here. The focus of a listed company is profit and stakeholder value creation. SBI Funds Management where he was CIO, Munot did not face that pressure.

Three, leading a massive mutual fund company as MD & CEO requires a lot of sales mindset. Investment management is a cerebral function. Sales, on the other hand, is a lot of blood and bones! Munot is not a proven sales leader and will have to win the confidence of his team members first.

The ‘Prashant Jain’ factor

Prashant Jain is a big factor at HDFC AMC. Jain is not nearing 60 and so ideally is not in retirement phase. Jain happens to be as old as as the furniture at the fund-house given that he has stayed and grown in this company. Jain joined Zurich Mutual Fund in the mid nineties and stayed on when HDFC Mutual Fund acquired the former in 2003.

At HDFC AMC, Jain is the CIO and executive director. Munot will be the CEO. This is going to be a tricky relationship as long as both are in the company. It was widely assumed Jain would one day get the CEO post at HDFC AMC, and now since Munot is in, it can be deduced that Jain was not interested in that profile. But, Jain’s funds have not exactly topped charts as recent history shows. In fact, Jain’s HDFC Equity Fund and HDFC Top 100 Fund have often suffered periods of underperformance due his unique value conscious approach. Curiously, both the equity funds have bet big on State Bank of India stock and are among the largest holders of SBI shares in the MF industry!

Should Munot attempt a massive overhaul at HDFC AMC, it will have to be seen how Jain takes it. Already, there is demand from some quarters that fund management strategies must change at HDFC AMC.

While on paper the role of CEO and CIO are different, Munot and Jain together at HDFC AMC cant bluff each other given that both understand investments too well. Hence, the appointment of Munot as MD & CEO and his impact on equity fund management team will be interesting to see over the period of time. It is not unusual for a CEO to bring their choice of fund managers to a new company. Will it happen here remains to be seen?

SBI MF no pushover

When SBI MF became the new no. 1 of Indian mutual fund industry, it was no happenstance.

SBI MF has over the years fought for numero uno position. It’s very process-driven when it came to fund management. Here, credit is due to not just Munot but the second and third line as well like R Srinivasan, Sohini Andani, Richard D’Souza, Dinesh Balachandran, Anup Upadhyay, Rajeev Radhakrishnan.

Last not not the least, EPFO flows and a strong distribution network backed by State Bank of India has helped SBI MF. The copious inflows from EPFO are a huge advantage for SBI MF. For many years, other asset managers have been eyeing EPFO flows but so far SBI MF and UTI MF have got the mandate. Each year EPFO gets huge deposits from subscribers and a portion of it automatically goes to SBI MF. This apart, State Bank of India’s massive bank distribution network has helped SBI MF get fund inflows. Munot cannot do anything to counter these challenges.

Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. Kumar is a financial journalist, with a functional experience of 15 years. He tracks mutual funds, insurance, pension, PMS, fixed income/debt and alternative investments markets closely. He has worked for The Times of India, The Hindu Business Line, Deccan Chronicle Group, DNA, and Value Research, among others, across different cities in India. He is deeply interested in marrying data insights with actionable opinion. He can be contacted at [email protected].

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