The Wealth Company Mutual Fund has started with a big bang. In just five months, your fund house has launched seven schemes. Most new fund houses prefer to move slowly and launch only one or two in that timeframe.
I think like an entrepreneur, not an employee-CEO, so my first priority is to complete the product basket. Also, distributors don’t sell the same schemes— some prefer balanced advantage funds, others multi-asset funds, large-cap funds or small-cap funds. Since we operate Business-to-Business (B2B), not Businessto-Consumer (B2C), I need a full suite to stay relevant to distributors. As an owner, I must also be agile and cover all bases. Performance can take three months, six months, or even a year to crystallise, you have to give it time. The sooner we launch a product, the sooner we begin building a track record.
RAPID FIRE
Q.Gold or equity — where’s your own money?
AIF and MF.
Q. Retire at 50 with enough money or work till 70 building an empire?
Build till the last breath. Purpose and passion outlive money.
Q. The one satisfying moment: NFO closes oversubscribed, or NAV hits a new high?
Always returns! Nothing beats the satisfaction of delivering real wealth to investors.
Q. Worst investment you’ve ever made personally?
Listening to hype. Lost entirely.
Q. Expense ratio or alpha, what keeps you up at night?
Alpha always. When you deliver, no one questions your expenses.
Q. A distributor, adviser, or banker has underestimated you because you’re a woman. Describe that moment in a maximum of three words.
God bless them!
Q. Morning workout or market screen, what comes first?
Workout. Heart rate belongs to fitness, not markets.
Madhu Lunawat
MD & CEO, The Wealth Company Asset Management
You say you are B2B, not B2C. Does this mean you are aligned with distributors…
Distributor, yes. We believe this industry must be distributor-led and advisory-led.
The Wealth Company Asset Management Company (AMC) is part of the Pantomath Group, a midsized investment bank. Is there any potential conflict of interest between the AMC and the investment bank? After all, the investment bank advises companies through the Initial Public Offering (IPO) process, in which mutual funds may later invest.
All AMCs have investment committees that oversee decisions and approve processes. I am not involved in day-to-day investment operations. We have dedicated Chief Investment Officers (CIOs)—one each for equity and debt—along with analysts and a research team that make investment calls.
As a fund house, we avoid investing in very small-cap companies. We also have a conflict of interest committee in place. While our investment bank has completed around 15 IPOs over the past two years, the mutual fund did not invest in any of them. Any proposal placed before the fund managers and the investment committee is evaluated strictly on its merits and within our defined risk framework.
Tell us a bit about this conflict-ofinterest committee.
It ensures that our fund managers closely scrutinise any investment idea where our parent, Pantomath Group, has acted as lead manager or co-lead manager for a company’s IPO. If such an opportunity arises, it is evaluated under our risk framework and referred to the conflict committee for a decision.
Did Sebi advise you to set up a conflict-of-interest committee?
No, Sebi did not advise. We have done this ourselves. Our AMC Board has four IAS (Indian Administrative Service) officers, who recommended establishing this committee. However, mutual funds may invest in companies whose parent or sister firms are investment banks. For instance, Kotak Bank, Motilal Oswal, and Axis Bank each have an investment banking arm and their own mutual fund house. In our case, we have added an additional layer of checks. Investments must be made on merit.
In an industry with 50 mutual fund houses, how would Wealth Company MF differentiate itself?
Despite low mutual fund penetration in a country as large as India, the industry has become largely commoditised. There is little differentiation in the types of schemes launched—most AMCs offer similar products such as large- and mid-cap funds. As a fund house, we are clear that our route to market is through distributors, who in turn reach investors. Unfortunately, sales in the Indian mutual fund industry are often driven by recent past performance. In January, according to data from the Association of Mutual Funds in India (Amfi), equity funds recorded net inflows of Rs.24,029 crore. Gold ETFs attracted Rs.24,040 crore — more than equity. This has happened on the back of gold’s superior past returns.
We don’t believe in forecasting, flaunting past performance, or hiding behind jargon. Instead, we are focusing on something the industry rarely discusses: investor psychology. While everyone celebrates the Rs.31,000–33,000 crore flowing into systematic investment plans (SIPs) each month, few acknowledge that 75% of SIPs are discontinued and 90% don’t last five years—well before compounding truly accelerates in the seventh or eighth year. In effect, money is exiting almost as quickly as it is entering.
When investors lose faith in equities, they rush back to annuity plans offering 5% returns that don’t even keep up with inflation. You’d be better off in a fixed deposit (FD). Look at what Franklin Templeton or Vanguard discuss globally, it’s always behavioural finance, never 1-year returns. That content simply doesn’t exist in India. What we have instead are YouTube babas who know exactly how to exploit your desire for instant gratification. We’re trying to change that conversation.
So we engage with distributors and have designed courses and materials for them. We help distributors enrol in a Harvard University course on behavioural finance. Distributors need to know how to manage client interactions and emotions.
One of your seven new funds launched so far is an Ethical Fund. That’s a curious choice for a new fund house that’s still building its product basket. What’s the rationale behind it?
The origin of the fund stems from the Pantomath group, which has publicly stated it will not support unethical businesses. These companies would include animal slaughter, alcohol, gambling and speculation. The group has never offered its investment banking business to such companies, either.
At present, ethical funds in India are categorised as Shariah funds. However, Shariah investing permits businesses linked to halal meat but excludes banking. Our approach is the reverse: we avoid companies involved in animal slaughter but are open to investing in banking. That defines what our Ethical Fund includes, and excludes. In addition, 50% of the AMC’s income from this fund is directed towards charitable causes aligned with Hindu and Jain traditions, such as cow shelters and the protection and welfare of animals.
Is this a Jain values fund, then?
It’s sattvic focused, which aligns with my personal values. The approach also draws from Christian principles, while incorporating elements inspired by Sharia and Jain traditions.
What is your corpus for this fund?
Around Rs 50 crore.
Are distributors selling it?
Very few distributors are currently selling it, partly because we have not actively engaged many of them on this fund. We have also kept the commission low, which is another factor. A few large wealth management firms are offering it to their ultra-highnet-worth clients, where there is demand for such products, as some family offices or individuals have mandates to allocate a portion of their portfolio to ethical schemes.
Close to the benchmark or not afraid of going far from it—what’s your fund house’s style going to be?
We are not passive investors, we are active managers, and for that, we charge an expense ratio of up to 2.5%. We must justify that. I definitely can’t be index-hugging. If my schemes mimic the index, investors will invest in passive funds or ETFs, they will not come to us. At the same time, this is a mutual fund, not an AIF, which can take significant risk. I believe we should have an optimally diversified portfolio. We have 55-56 stocks in our flexi-cap fund — no long tail of 140-150 stocks. We encourage our fund managers to beat their benchmark indices.
Are you confident you can get money from smaller towns?
Absolutely. There’s a huge opportunity there, for several reasons. First, in smaller towns, bank-led distribution dominates, and that’s where much of the mis-selling occurs. Distributors there are feeling squeezed by aggressive banks and, increasingly, by direct platforms as well. Second, the top AMCs have grown so large that their commission payouts to distributors have dropped significantly. New fund houses like ours can meaningfully offer better terms.
More importantly, we are changing the conversation itself. We tell distributors: stop chasing thematic trends and selling past performance. If you are onboarding a first-time equity investor who has only used FDs and annuity plans, place them in broad-based categories—large-cap, flexicap, multi-asset or balanced advantage funds. That’s enough. This approach resonates with distributors who have seen the fallout when clients are pushed into narrow thematic bets.
The distribution ecosystem in India has a structural problem. A large number of MF distributors entered the profession without formal training, they cleared an exam and started selling. Many still do it part-time. And in the five-year bull market before the recent correction, they earned very well, not necessarily because of skill, but because markets were one-directional and commissions were linked to rising NAVs.
Any existing AMC that you respect a lot? Who do you look up to?
DSP Mutual Fund, Parag Parikh Mutual Fund.