The global crisis has affected most businesses but the turmoil offers an opportunity for those who stay focused and think long term, says Vivek Kudva, President of Franklin Templeton Asset Management (India).
He attributes the strong performance of Franklin Templeton to its diversified and long-term approach. The Middle East, he says, is one of the most attractive markets because of its huge surpluses. The region presents immense opportunities to companies like Franklin.
In this exclusive interview with Emirates Business, Kudva speaks about the company's plans and investor behaviour.
Has weak market confidence affected the volume of investments handled by Franklin Templeton?
The ongoing scenario has affected all businesses. We have put together strategies that are long-term in nature. Having said that, we are an asset management company – our revenues are driven by assets under management. Between December 2007 and 2008 assets under management fell globally for all companies. We too have been affected, but lesser than many others. From a balance sheet perspective we are a strong company and many of our funds continue to do well. Our company is diversifying internationally – we operate in 30 countries, sell funds in more than 100 countries and have investors in more than 165 nations. Franklin has a very diversified business model.
With businesses worldwide bogged down by the meltdown, what are the critical points of the strategy Franklin follows?
In the present scenario businesses are hostages to the market. So if there is, say, a 50-per cent decline in the market you can expect a similar decline. However, the key issue is to stay focused. At Franklin we focus on the long term so we continue to make strategic investment and look at strategic opportunities. Besides we are spending a lot of time talking to our distribution partners and addressing their concerns. You cannot force people to buy funds. You have to talk about the long-term strategy and look at performance in the long run. Our investors are still buying funds. We have started communicating a lot with large institutional partners and distributors; they want someone to hold their hands in this time of crisis.
Has there been an outflow of funds from institutional investors who generate a significant chunk of your business?
Institutional investors are still investing. In fact, the second half of 2008 saw some of them put in more money. They believe the market is attractively valued and that India will do well in the long run.
What are your plans for the Middle East?
Our business in this region is doing very well. The region has had a net accretion of wealth due to high oil prices. People are looking for investment opportunities. We are looking at products for both the retail and the institutional sides and are gradually expanding. We invested in Algebra Capital in the UAE and the move has helped us reap the benefits of their sound knowledge of the markets in this region. For us the Middle East continues to be a favoured market.
Are you looking for other acquisition opportunities here?
We are always on the lookout for opportunities and that is how we acquired a stake in Algebra.
Do you see any consolidation happening in the financial services sector?
For sure. And this would provide opportunities for both large and small players to reap the rewards of synergies.
What lessons have fund managers learned from the economic crisis?
Our managers invest for the long term. In that sense nothing has changed except that many of our managers think at this time valuations are pretty attractive. The current market environment presents a great buying opportunity for long-term investors. We do not change our philosophy and approach, we are bottom-up stock pickers, we have deep research capabilities and are using the slowdown as an opportunity.
Do you think governments are taking enough measures to tackle the crisis?
It is very hard to say if it is enough as no one really knows what the extent of the problem is, the scale of the banks' toxic assets and their exposure to derivatives. It's tough to say if its adequate but I think the governments are doing a lot. But only time will tell if more should be done. I believe the net outcome of all this will be positive as it will stabilise the financial system. My sense is that all this will last at least for the next 12 months. It's hard to see things improving dramatically but it's hard to predict.
What is your advice to investors?
I would urge them not to make hasty decisions just because there is a crisis. It's critical to invest systematically with a long-term perspective. The biggest mistake investors make is to start putting in money when it's too late. Investors should also keep reviewing their portfolios. What they have to do is understand their risk appetite and see what asset allocation they are comfortable with. The golden rule is to stay in the market for some time.
PROFILE: Vivek Kudva President of Franklin Templeton Asset Management (India)
Kudva is responsible for building up Franklin Templeton's business in India.
He was previously General Manager – Banking at the National Bank of Oman in Muscat. Prior to that he worked with HSBC for more than 18 years. He was instrumental in developing and executing HSBC's retail growth strategy in India.
Kudva is an engineering graduate from the Indian Institute of Technology, New Delhi and has a postgraduate diploma in management from the Indian Institute of Management, Ahmedabad.