Emkay Global Financial Services, a financial services firm that offers broking, portfolio management, and wealth management services apart from commodity and currency advisory made an important strategy shift some years ago in deciding to focus mainly on institutional clientele as against going with the prevailing wisdom of targeting mass retail.

Krishnakumar Karwa, MD, Emkay Global Financial Services, explains that the company did this after figuring out that servicing the mass retail investor came with high costs and its own set of challenges without commensurate returns. Speaking about that experience, Krishnakumar said, “There is an information asymmetry that is there between institutional investors and mass retail — and the retail investor is often not able to value what is given to him.” While institutional clientele — whether FIIs, mutual funds, insurance companies or corporates — though demanding, are also willing to pay the price when they see value in the offering.

Krishnakumar acknowledges that in the institutional business, competition is stiff, margins thin and commissions are often trending down. But, the positive is that once the fixed costs (which are high) are taken care of, then the increasing volumes that flow in, take care of the company’s growth needs.

3% of MF biz

The focus on equity research, which he said, is in its DNA, has helped the company make inroads into the institutional business segment and today it has a share of about 3 per cent of the domestic mutual funds business. The boom in the markets during the past few years has seen the assets under management of their mutual fund clients grow and as a corollary, Emkay too has benefited, he said.

The company frequently figures in the top 15 firms in various rankings for its research calls and execution. Its portfolio management and alternative investment funds services for HNIs and ultra-HNIs have also grown strongly in the last year. Assets under management for Emkay have touched ₹500 crore and are expected to double over the next one year.

Asked about the blips on the radar, Krishnakumar said, “Life is not an excel spreadsheet where everything works neatly according to plan. There will be some ups and downs and cyclicality. But the broad direction is positive.” He added that the increasing financialisation of savings, the SIP culture and robust domestic investor support (that has pitched in even as FII inflows have tapered off) lends credence to the belief that the next few years will see higher growth.

Time to temper expectations

At the same time, he cautioned investors to temper their expectations reasonably, arguing that with a risk-free return of around 7-8 per cent, equity returns of about 15-17 per cent should be more than satisfactory. He predicted that this year would be one of consolidation after the decent run enjoyed by the markets over the past few years.

He expected the results of some of the major reforms undertaken by the government to start showing in macro numbers over the next six months to a year. The next major trigger may well depend on the election results in 2019, he said.

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