A Balasubramanian: India's Mutual Fund Legend Talks Growth, Faith & The Future

In the latest episode of Simple Hai!, A. Balasubramanian, Managing Director and CEO of Aditya Birla Sun Life Mutual Fund and a figure widely regarded as a legend in the Indian mutual fund industry, shared insights from his journey spanning more than 30 years in the capital markets.

Having begun his career as a bond market dealer before transitioning to roles including equity dealer, chief dealer, fixed income portfolio manager, CIO, and eventually MD/CEO for the past 15 years, Bala has a comprehensive view of the sector.

The 'Mutual Fund Sahi Hai' Revolution

A significant topic of the conversation, hosted by veteran finance journalist Vivek Law, was the 'Mutual Fund Sahi Hai' campaign, which Bala spearheaded during his tenure as Chairman of AMFI (Association of Mutual Funds in India) in 2016. He described the campaign as bringing about a "revolution" aimed at increasing awareness about mutual funds.

Prior to 2016, the dominant perception was heavily influenced by the statutory warning, "Mutual Funds are subject to market risks," delivered in a loud, off-putting tone that discouraged investment. The campaign's strategy, developed through committee discussions with representatives from various fund houses, sought to reframe this perception by adding "Mutual Fund Sahi Hai" before the risk warning, implying that while risks exist, mutual funds are still a suitable investment option. SEBI endorsed this approach, which has since done "wonders for the industry."

Demonetisation and Shifting Financial Behaviour

Bala also highlighted the impact of demonetisation in 2016. The announcement led to money entering banking channels, prompting people to consider financial products beyond traditional cash holdings, real estate, gold and fixed deposits. This, combined with the increased awareness from the "Mutual Fund Sahi Hai" campaign, resulted in the highest growth for the mutual fund industry in 2017, immediately following demonetisation.

The Power of Compounding in Investing and Life

He reflected on the industry's growth as well, noting that his earlier expectation for the Asset Under Management (AUM) to reach 50 lakh crore within four to five years was not only met but surpassed. He attributed this higher growth to the power of compounding, which he sees applying not just to market returns but to all aspects of life, including good deeds and aspirations.

Bala told Law that the mutual fund industry's growth rate has averaged around 20%, higher than the 14% typically estimated, driving the AUM past initial conservative projections. Comparing the mutual fund industry to the banking sector, Bala mentioned that before demonetisation and the "Mutual Fund Sahi Hai" campaign (around 2009), the mutual fund AUM was only about 13% the size of the banking industry. Today, it stands at almost 27%.

He expressed confidence that the Indian mutual fund industry's AUM will come close to and eventually surpass the banking industry's size in the next 10 years. This projection is based on a significant cultural shift, where mutual funds are increasingly becoming the primary investment vehicle for people, considered even before traditional options like fixed deposits or real estate. This change in mindset, coupled with potential regulatory drivers similar to the US 401k plans which promote retirement planning discipline, is expected to fuel future growth. He also noted the parallel growth in NPS and insurance.

From Fund Categories to Investment Solutions

Looking ahead, Bala believes the industry needs to evolve towards solution-based approaches rather than just offering product categories. While SEBI's categorisation has helped investors understand different fund types (large cap, mid cap, etc.), the next phase should focus on bundling products into solutions for specific goals like child education, retirement planning or emergency funds. He emphasized that the Systematic Investment Plan (SIP) is the most important plan for investment.

India's Economic Growth and Market Cap Potential

Discussing the future of wealth creation, Bala connected it to India's economic growth vision, such as 'Viksit Bharat 2047'. He stated that as the GDP grows, the market capitalisation is inherently linked and will also grow. India's current GDP and market cap are both around $4 trillion, and if the GDP reaches $10 trillion, the market cap should follow suit. He stressed the importance of faith and trust in the Indian growth story for equity investing, rather than focusing solely on immediate returns.

Advice to the Next Generation

Bala's advice to the younger generation includes having high aspirations, focusing on self-improvement over comparison, understanding that earnings grow with time and effort, making oneself indispensable through hard work, believing in the power of good deeds and adapting to life's changing roles. He cited Prime Minister Narendra Modi's work ethic as an example of working for a larger interest.

He mentioned having taken up golf after the pandemic, finding it a form of meditation and a tool for strategic thinking and self-improvement. For Bala, work is worship and a priority, though he finds time for his passions.

A Balasubramanian’s journey and reflections underscore why he remains one of the most respected voices in the Indian mutual fund space. His blend of technical expertise, long-term vision, and human values provides not just financial guidance, but also timeless life lessons.