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Informist, Wednesday, Sept. 16, 2026

 

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--HDFC AMC Munot: MF distributors must know criticality of investor trust
--CONTEXT: HDFC Asset Management MD Navneet Munot's comments in an interview
--HDFC AMC Munot: Every risk mgmt tool important in uncertain global environ
--Munot:Risk mgmt for HDFC AMC deeply ingrained, not after-the-fact activity
--HDFC AMC Munot: Scheme's total expense ratio reduces as size grows
--Munot:HDFC AMC looks at profitability not from narrow equity-debt mix view
--HDFC AMC Munot on mis-selling: Co conducts trainings to educate investors
--HDFC AMC Munot: Investors must look beyond near-term fund performance
--HDFC AMC Munot: Risk-reward changed unfavourably for low-duration funds
--HDFC AMC Munot: Large-caps currently trading at discount to 10-year avg
--HDFC AMC Munot: Tech, digitalisation made MF investing easier
--HDFC AMC Munot: After-sales svc to investor should match ease of investing
 

 

By Rajesh Gajra

 

MUMBAI – Given the weak investor literacy levels in the country, notwithstanding the efforts of the market regulator and market intermediaries over last many years to improve it, the financial products landscape is a fertile ground for mis-selling. The mutual fund industry is no exception. As the managing director and chief executive officer of HDFC Asset Management Co. Ltd., Navneet Munot is very clear that trust is critical to the mutual fund industry. In an email interview, Munot said "distributors should be mindful of that in their communication with investors."

 

Munot, who took over the reins of HDFC Asset Management in February 2021 as its managing director and chief executive officer after quitting his chief investment officer post at SBI Funds Management, takes pride in HDFC Mutual Funds' "long-term track record, with several of our funds having a history beyond two-three decades, which shows an investor how these funds have behaved across market cycles."

 

Munot oversees HDFC Mutual Fund's compliance with the stress-testing framework prescribed by the Securities and Exchange Board of India. "We live in a highly uncertain global environment, so it is important to have every risk tool available to us," he said. HDFC MF's focus has always been on risk-adjusted returns, according to Munot. "I always say that risk management is not an after-the-fact activity for us; it is deeply ingrained in the entire investment process," he said.

 

Mutual funds compete with direct equity investing in terms of costs. Recently, SEBI mandated the mutual fund industry to shift to base expenses ratio plus taxes and trade execution costs from total expenses ratio. According to Munot, the costs to mutual fund investors in India are among the lowest in the world. "India's mutual fund industry has telescopic pricing, so the total expense ratio reduces as a fund grows in size," he said. A telescoping pricing structure represents benefits from AUM scaling up being passed on to customers.

 

For asset management companies, particularly the listed ones and HDFC Asset Management is listed on exchanges, the mix of equity and debt corpus matters to their financials. But Munot said his fund house does not "look at profitability from a narrow perspective." HDFC AMC provides all solutions to meet diverse investor needs, he said.

 

For the fund house, the share of assets under management sitting in equity is currently up to almost two-thirds from around 40%, according to Munot. "The (corpus) mix is a function of market cycles, market movement and flows into various categories," Munot said. As per data from the Association of Mutual Funds in India for the June quarter, HDFC Mutual Fund had the third-highest average AUM of INR 9.35 trillion, out of the total industry AUM of INR 83.14 trillion.

 

MIS-SELLING CONCERNS

To a question on his observations on the industry's selling practices and the specific checks and balances HDFC Asset Management deploys to prevent mis-selling by its empanelled distributors, Munot said, "On our part, we conduct trainings across the country to educate investors." According to Munot, AMFI and fund houses have done a great deal of work on improving investor awareness, "which improves the odds of investors choosing well."

 

While he acknowledged the criticality of investor trust in the mutual fund industry and urged distributors to be conscious of this, Munot said, "Investors too should consider long-term track record, pedigree of the fund house instead of near-term performance while investing." He added that a fund that suits one investor could be wrong for another, depending on the horizon and risk appetite, implying the need for mindful distribution practices.

 

COMPETITIVE PRESSURE

Currently, there are around 55 AMCs in the mutual fund industry. The mutual fund industry saw 13 new entrants in the last four years up to the June quarter, as against just three new entrants in the trailing four-year period. HDFC Mutual Fund, like its other old peers, has encountered competition from all around – new and existing. "Entry of new players validates our conviction on the potential growth of the industry," Munot said.

 

To a question on how HDFC Asset Management leverages its long track record and maintains competitive advantage, Munot said the fund house does not treat its historical strengths as ground for complacency. "Investor expectations keep evolving, and we remain investor-centric in our approach," he said.

 

The size of the investor pie has also grown, mitigating the pressures from competition from new entrants for large fund houses. Unique investor count went up 13% on year in FY26, and tier-III cities accounted for 55% of the investor base, according to SEBI's FY26 annual report. With digitalisation making investing easier, "people can invest from a phone now, without having to reach a branch," according to Munot. This is accentuated by large portions of flows coming through SIPs, in which small amounts are being invested on an automated basis, Munot indicated. 

 

CATEGORY FLOWS

Trends in both the debt and equity funds category underwent subtle but notable changes recently. In the June quarter, the AUM share of liquid and overnight funds rose sharply over the same period last year. Risk and reward changed unfavourably in the first half of the year for funds such as low duration and money market, owing to tighter system liquidity and a sharp rise in short-term rates, according to Munot.

 

"Money in short-term funds appears to have moved lower down the duration curve as a result, and that is what shows up as a higher liquid and overnight (funds') share," he said. A large part of corporate investors deploys treasury money at the shorter end, while individual investors have relatively a longer duration through debt funds or hybrid funds, according to Munot.

 

Among equity funds, investor inflow into large-cap funds was weak in the June quarter on year as compared to mid-cap funds and small-cap funds. "Over the last few years, mid- and small-caps have outperformed large-caps, and small-caps also offer a larger universe to pick from. In recent (investor) communication, we have highlighted that from a valuation perspective, large-caps trade at a discount to the 10-year average and investors should take note of that."

 

HDFC Mutual Fund's product mix is tilted in favour of equity at present. According to Munot, the fund house's systematic investment plan book is largely in equity. This is also the case with other fund houses.

 

Munot said the higher relative returns in the equity market over a period of time, "aided by our alpha, have meant that growth in equity AUM has been higher" for the fund house. This has taken its equity AUM's share to almost 66%, up from around 40%, he said. "Our job is to have a well-managed product in every category and to offer it to the right investor. The corpus mix then follows from that, rather than the other way around," Munot said.

 

INVESTOR SERVICE STANDARDS

To a question on investor perception of weak service standards by fund houses with respect to redemption proceeds delays and payment glitches at the time of purchases, Munot said HDFC Mutual Funds views this part of the business seriously. "The ease of getting service after investing should match the ease of investing itself," he said.

 

"In this industry, the real difference comes from trust, and from how an investor or a partner feels about dealing with us," Munot said. "With servicing volumes having grown as they have, we have been continuously investing in technology, talent and training in investor services. Despite over 97% of transactions being digital, we have opened more than 50 new offices, a large number of them in small towns, because physical presence is still needed there," he said.

 

On whether the replacement of earlier mutual fund regulations by new and stringent regulations this year has raised compliance costs for fund houses, Munot said the mutual fund industry works closely with SEBI and the direction over the years has been towards investor centricity. This "shows in the Potential Risk Class matrix for debt schemes, the risk parameter disclosures on small and mid-cap funds, and the further refinement of scheme categorisation," he said. HDFC Asset Management never looks at compliance or risk management as a cost, according to Munot.

 

On specialised investment funds which fund houses have begun launching in the last one year for high net worth individuals, Munot said these funds sit between a mutual fund and a portfolio management scheme or an alternative investment fund. Meant to meet the needs of a different investor cohort with a higher risk appetite, the specialised investment funds run strategies a mutual fund cannot, long-short among them, inside the same regulatory framework, Munot said.  End

 

Edited by Avishek Dutta

 

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