The global financial crisis of 2008 hit the mutual fund business in India hard. There was huge redemption pressure on the entire industry and both equity as well as fixed income funds were affected. Franklin Templeton Investments was no exception. The market had a liquidity crisis and, like many other funds, Franklin Templeton had no choice but to sell some of its debt assets at extremely low valuations.
With big losses nigh, the Indian team contacted Vijay Advani in the US office to see if they could get a line of credit to help them tide over the crisis. Advani, who worked in the headquarters at San Mateo, California, served as a member of the CEO’s direct report group in the US. He understood the problem and within 24 hours, was able to wire $146 million to the Indian office.
“We needed that money for ten days and we remitted the same by October 2008. That guy is restless but loves the India office. [We] don’t know what would have happened had he not sent the funds to us so promptly,” says Vivek Kudva, managing director, Franklin Templeton Investments, India and Central Eastern Europe, Middle East and Africa.
Advani, more than anyone, understood the need to bail it out. After all, he had laid the foundation for Franklin Templeton to become one of the biggest asset management businesses (it had assets under management worth Rs 70,780.42 crore as of December 2015) in the country, having set up the office in 1995. In fact, it was in part due to his success here that, in 2000, he was moved to Singapore to look after the Asia business and his profile in the corridors of power kept becoming bigger. Consider that in August 2015, Advani was appointed co-president of Franklin Resources. A veteran of 20 years with the fund house, he has served as the member of the CEO’s direct report group since its formation in 2005, Franklin Resources, which is the holding company of the investment arm.
Last month (December 2015), he was in India to meet clients and explore newer business opportunities for the India office. Advani, who is responsible for the company’s global retail and institutional strategies and initiatives, including sales and marketing, client servicing and product development, comes down to India a couple of times a year. During his visits, he makes it a point to spend time with employees he had hired back in 1995. (When he was in Mumbai last month, he met with the India office’s oldest employee, someone he had hired in the administration department.)
On the day of his interview with Forbes India, Advani had started early and had a tight schedule ahead of him. But he walked in exactly at the given time of 11 am at the 12th floor office at the Indiabulls Finance Centre in Lower Parel. And in the next hour, he told us the story of how he set up India’s first international asset management business and how he managed to make it connect with the customer. “I wanted to build a business which was headquartered in the US but had a very local connect with the customers that it addressed. I think I was able to make it happen,” he told Forbes India.
His relationship with Franklin Templeton (it was just Templeton at the time) dates back to the 1980s, when he was working with the World Bank. Advani had been working on pension reforms for various emerging markets, having understood the importance of pensions to the deepening of capital markets and, at the same time, their role in taking pressure off governments faced with an ageing population. While working in Sri Lanka, he realised the country did not have a developed money management business and so, he approached Templeton to set up a joint venture in Colombo. (Franklin Templeton was formed in 1992 when Franklin Resources, another asset manager, acquired Templeton, Galbraith & Hansberger at a cost of $913 million.)
The fund house later approached Advani in 1995 to set up the India business. He started the India operations single-handedly while working out of a hotel room for six months. His first few employees were hired when he was yet to secure an asset management licence from the Securities and Exchange Board of India (Sebi). In fact, his second employee, Astrid Lobo, worked at Glaxo as a secretary and met Advani for an interview. Advani remembers giving her the appointment letter—she was hired as an executive assistant—on the paper napkin that was lying on the table. Today, Lobo works with Franklin Templeton Canada.
The first year had the tonality of a startup; for instance, there were delays in opening a bank account because the licenses came in late. Finally, he got clearances from Sebi and the Foreign Investment Promotion Board (FIPB) and set up a joint venture with Hathway Investments belonging to the Rajan Raheja group.
It was tough going in the beginning. Sebi had a rule that any new fund—Templeton India Growth Fund in this case—needed to raise Rs 50 crore to keep the asset management business functional. If the company failed to raise that kind of money, it would have to shut shop. Earlier, Morgan Stanley, an international fund house, had managed to raise around Rs 1,000 crore but had not lived up to public expectations.
Advani had a tough task collecting the funds. He and Mark Mobius, the emerging markets guru at Franklin Templeton, did roadshows in 21 cities with advertisements in newspapers and hoardings. Advani thought he would have the same success as Morgan Stanley did. But that did not happen. Anxious, he and his team had to extend the timeline for the public offer to raise the minimum amount of funds. “I remember Hemendra Kothari [who was lead-managing the issue] and I used to sit in the DSP office in Nariman Point calling up various clients to subscribe to the fund. We did it for five days and finally managed to scrape through,” Advani says.
The first few months were challenging but there was no pressure from the international office, he recalls. “My vision was to be a premier asset manager. It doesn’t mean the most profitable or the largest. For me, it was something like a privilege to be associated with the group. Be it investors, regulators or other stakeholders. Everyone should feel proud of us,” he says.
Advani had to face snark from the market in the early days. Distributors would snigger, saying Franklin Templeton products weren’t in favour with the customers. But Advani was not interested in launching products that became fads or the flavour of that particular year. He wanted to create the right products that would cater to the long-term goals of the investor. He was not in a race for assets, he says, and when he hired his marketing head, he decided on Rajiv Vij from Hindustan Lever.
Vij had no experience in selling financial products. But Advani’s vision was very clear: He wanted to expand the mutual fund market and take their products to areas like where, say, an FMCG company like Hindustan Lever would. At that time, his biggest competition was UTI which was a household name. Franklin Templeton did not stand much of a chance, or so the market had concluded.
But Advani decided to stay with his core values of serving the customer. He knew he would be able to achieve his goal over the long term.
His biggest breakthrough was when Franklin Templeton acquired Kothari Pioneer, a fund house based in Chennai, in July 2002. It had KN Sivasubramanian and Sukumar Rajah, two of the best fund managers in the country, and a connection with independent financial advisors. This had been absent from Franklin Templeton which mainly sold its products through banks. This also led to them building their own back office (for global tech, back-end operations and fund accounting) in Hyderabad which continues to do a range of local as well as international work.
Franklin Templeton believed that when they buy a company, they buy the talent. So the first thing they did with the Kothari Pioneer portfolio management team was to leave them alone. They integrated their compliance and legal processes with that of the main organisation. The portfolio managers wanted to work out of Chennai which was also not a problem. And the first CEO of the merged entity was Ravi Mehrotra who belonged to Kothari Pioneer. “It was a message that this is not an acquisition but a merger,” Advani says.
The fund was one of the first members of the Association of Mutual Funds of India (Amfi). It was also the first fund in India to be allowed feeder funds to invest in the overseas market. Since the debt market in India was illiquid, the fund worked with Crisil, a firm known for credit analysis and rating, to get debt valuations which later became an industry norm. “Being the only foreign entity, we are not a conglomerate,” says Advani. “We don’t have banking and insurance and we have no conflict of interest.”
It is this value system that has allowed many of his employees to stay at the same place for over 20 years, points out Advani, who feels that he has created opportunities for them. The foundation of his company is solid and he should be able to pass through the round of disruption that is now being created by the fintech companies in the mutual fund space.
Firms that survive will be those who self-cannibalise and then reinvent themselves. “We know that what got us here will not keep us here. In mutual funds, what part of business will be done electronically and how much of it will need human advice is the debate taking place in the US,” he says. He does reiterate, however, that “you will always require advice and someone to hold your hand in times of crisis”.
But for Advani, the biggest learning has been to stay with the core values of the firm. He remembers an incident from the time he had set up his Mumbai office with a rudimentary staff. An investor had called them up with a query, and Advani recalls answering the phone, and telling the investor that someone would get back to him. He had then asked his operations head to solve the problem of the investor.
Around a year later, he met someone at a social gathering who said that his father had once called up his fund and had been surprised at the helpful response of customer service. That had prompted him to invest their family wealth with the fund because this kind of customer support was not common in India.
For Advani, this was part of his approach to never lose focus from the needs of the customer. He stayed true to them and saw his fund grow. “There is a quote from Mahatma Gandhi about getting Independence. First they ignore you, then they laugh at you and then they fight you and finally you win. And that’s the same thing with Franklin. We have gone through all of that but stayed with our core values and today we are the winners,” Advani says.
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(This story appears in the 05 February, 2016 issue of Forbes India. To visit our Archives, click here.)
DREAM BIG...and dare to see what happens! Inspiring article of perseverance and success!on May 11, 2016
Vijay is a superman and super human being. Love him and God bless him.on Feb 8, 2016
Very interesting one!! Love the Quote of Mahatma Gandhi.on Feb 4, 2016
You have always set a standard for mutual fund investing in India.on Feb 2, 2016
FANTASTIC INTERVIEW. CONGRATS TO MR. VIJAY ADVANI AND HIS TEAM.on Feb 2, 2016