PGIM India Mutual Fund is wholly-owned by PGIM, the global investment management entity of the US-based Prudential Financial Inc (PFI) with over $1.4 trillion in AUM. Ajit Menon, CEO, PGIMIAM, oversees all aspects of the asset management business. An industry veteran, Menon has over two decades of leadership experience in business strategy, distribution, sales and marketing. He joined PGIM India from Tata Asset Management Co, where he was head, strategy. Prior to Tata AMC, Menon had spent over 15 years with DSP Blackrock, where he played a key role in the growth of the business. Menon shares his views here with Lancelot Joseph. Excerpts:
Markets are witnessing a liquidity-driven rally. What is your recommendation for investors?
We already know that markets tend to be a slave of politics in the short term and economics in the long term. Volatility is an inherent feature and deep corrections and sharp pullbacks effect people as much as going down the deep end of a roller-coaster, though this gives no thrill for those who are misallocated or don’t have the appetite. Higher liquidity, lower interest rates for long-term investments, a benign dollar and rising consumerism fed by the middle class, increasingly from emerging markets – they are all variables that will have an impact on investments in the months and years ahead.
Our recommendation to investors would be that this is as good a time as any to revisit their financial plan and make sure that they are focussing on downside protection strategies. These strategies include, according to me, first, making sure that you have adequate insurance; second, building an emergency corpus; third, evaluating your investments to reduce overlaps and ensuring enough diversification across asset classes; and finally, if it all feels too much, talking to and appointing a trusted financial advisor, who can work with you and help with all of the above.
What are PGIM India's MF plans going forward?
We are a young brand in our current avatar in India but PGIM is part of Prudential Financial, which has a 140-year legacy and is the tenth largest asset manager in the world. We do have strong ambitions and plan to be among the top 20 mutual funds in India over the next three years and climb further from there. We will also not be shy of inorganic growth, if the right opportunity presents itself along the way. For now, our focus is on making sure that our investment platform is strong and consistent.
How do you look at 2021 and your advice to retail investors?
The key will be how inflation pans out and its impact on interest rates. We are watchful of that and believe that the current low interest rates will prompt investors, especially retail, to chase returns to make up for perceived and real gaps in their wealth creation journey. The mutual fund industry is tightly regulated, transparent and has various options that can help retail investors. Primary among them according to me, are the auto asset allocation driven products and hybrid funds. They are tax-efficient and give you better risk adjusted returns.
This will help you stay ahead of and indeed take advantage of volatility. Generalising is sometimes dangerous, when it comes to money management, as each individual household will have their own nuances. Therefore, seeking advice from a trusted, qualified and certified advisor is key. They will help you tackle the ‘recency effect’ which impacts retail investors. Essentially big recent news, positive or negative, that prompts people to over-allocate to gold, or real estate, or equities, etc.
Recently, PGIM India introduced an EMEF in India. Would you share some details on the overall EM sector?
One of the powerful drivers for emerging markets is the expected growth in middle-class spending from about $37 trillion in 2017 to $64 trillion by 2030, globally. Rapid economic growth, greater consumption and cutting-edge innovation, stand out in favour of emerging markets and provide attractive investment opportunities for investors to significantly diversify their portfolios.
The mutual fund industry is tightly regulated, transparent and has various options that can help retail investors
You came out with a retirement survey recently, which highlighted the need for planning for retirement in India. What are your thoughts in this regard?
One aspect worth highlighting is that retirement is the only financial goal for which you do not get a loan. For other financial goals like children’s education, buying a house, car or starting a business, you could get a loan to fill any funding gap. For retirement, though, there is no loan to fund any gap. You do have products like reverse mortgage, but these have not yet matured as solutions. Our survey highlighted the fact that retirement is buried low in the priority list. The other aspect we encountered during our survey is that over half the people who do not have a retirement plan said that they do not need a financial plan.
They believe they will continue to work. As generations change, the attitude of hanging up your boots at a specific time or being dependant on your children is also changing. We believe that this should ideally not reduce the priority of planning a corpus that gives you a primary source of income and leaves you to pursue your passions. Plus, one must be mindful of preparing for health-related emergencies that may put a break on their working-for-ever plan. In conclusion, I would say that retirement does have negative imagery associated with it for a lot of people. It’s time to look at changing the conversation from planning for retirement to planning for ‘financial freedom’.