“LIC Mutual Fund, India’s 23rd largest asset management company (AMC), has initiated a comprehensive review of the schemes that were incorporated into its portfolio following the successful merger with IDBI Mutual Fund on July 29. According to TS Ramakrishnan, CEO and Managing Director of LIC MF, this review aims to evaluate the performance and viability of the merged schemes.
As a result of the merger, 20 schemes from the former IDBI MF were integrated into LIC MF. Among these, 10 schemes were merged with corresponding LIC MF schemes, while the remaining 10 continue as standalone offerings within the merged AMC.
The set of 10 standalone schemes includes those focused on small-cap, mid-cap, dividend yield, and gold funds. LIC MF intends to capitalize on the demand for these schemes, which have displayed popularity in recent times, as a means to bolster its Assets Under Management (AUM).
Having concluded July 2023 with AUM of Rs 24,133 crore, LIC MF is sponsored by India’s Life Insurance Corporation (LIC).
A Performance-Driven Approach
Founded in 1989, the fund house had ranked as the sixth-largest AMC in November 2009 with assets of approximately Rs 50,000 crore. However, by June 2023, the AUM had reduced to Rs 19,000 crore.
Ramakrishnan shared, “Our fund managers are evaluating the performance of the new schemes, identifying underperforming stocks, and considering whether any adjustments are necessary. Our stock and equity selection criteria involve discussions with management and a long-term perspective. If needed, certain stocks will be removed, and new ones may be introduced.”
LIC MF will retain its flagship products, including balanced advantage, large & mid-cap, banking and financial services, and infrastructure funds.
Ramakrishnan emphasized that the fund house’s primary focus is now on ensuring optimal performance across all schemes moving forward.
Strategic Approach to Expansion
Traditionally tilted toward debt funds, LIC MF has gradually shifted its focus to equity over the last three years. Although the AUM remained largely stagnant around Rs 18,000 crore (prior to the IDBI MF merger), the equity portion increased from 21 percent to over 42 percent within this period.
The merger with IDBI MF allowed LIC MF to substantially expand its equity fund portfolio, a feat that would typically require around two years to launch 10 new schemes in the Indian mutual fund market.
While the fund house has identified opportunities for launching thematic funds centered around consumption, manufacturing, and information technology sectors, it plans to adopt a cautious approach.
Ramakrishnan noted, “Expanding our product offerings is of little value without simultaneously enhancing the performance of existing schemes.”
Identifying itself as a mutual fund for the Indian middle class, LIC MF draws a significant portion of its investors from tier II and III cities. Despite this, a significant portion of growth within the Indian mutual fund industry has been attributed to millennial investors.
To engage new investors, the fund house recently revamped its website and has plans for further digital enhancements.”