In The Hot Seat With Forbes Advisor India: Radhika Gupta

Radhika Gupta is the managing director and chief executive officer of Edelweiss Asset Management Co., the Edelweiss Group’s investment and advisory business. 

A graduate of management and technology from the University of Pennsylvania who has joint degrees in Economics from the Wharton School and Computer Science Engineering from the Moore School, Gupta started her career with McKinsey & Co. and served as a hedge fund manager at AQR Capital before moving to India to start her own venture Forefront Capital Management. 

Her alternative asset management firm was acquired by the Edelweiss Group in 2014, and in 2016 she helped the Group acquire JP Morgan’s Indian mutual fund business and Ambit Capital’s alternative investment funds business.

She took over as the CEO of Edelweiss Asset Management business in 2017.

Gupta is an avid bridge player and she likes to compose poetry and cook in her free time. 

In a conversation with Forbes Advisor India, Gupta spoke about why she thinks the Indian mutual fund industry is in its infancy with tremendous growth opportunities ahead and how she wishes the cyclicality nature of investing in the stock markets goes away for good. 

What lies ahead for the Indian mutual fund industry in the coming decade?

In the Indian context, we are in a very young and exciting phase and I almost compare it to teenage years. 

If you look at the numbers, they tell you that mutual fund penetration as a percentage of GDP is probably between 4-6% and the world average is 40%. We have a tremendous headroom just to match the rest of the world. And quite frankly, that excites me in terms of opportunity. The opportunity relative to the rest of the world, excites me tremendously. 

The opportunity that we have relative to the rest of India also is very exciting if you look at the number of people who have bank cards or who have insurance as investments versus the two crore odd people who have mutual funds as investments. 

I think the industry is in its infancy. There is tremendous room for anyone good and credible out there to come and do stuff. And I also believe the industry is ripe for disruption probably in a way that it wasn’t as much 10 years ago, because suddenly you know you can be a new player and find a niche for yourself and reach the consumer without having 200 branches all over India because, ultimately, each phone that you have in hand is a branch that you have. 

With things like social media, even the importance of marketing budgets has gone down. So I believe it’s an industry ripe for disruption. There is tremendous opportunity for benchmarking globally, and there’s tremendous opportunity to benchmark us to India. And it’s also a time when people are embracing new concepts, so all in all a very exciting space to be in and there’s a reason I chose to join in this industry four years ago.

Do you see any challenges in spearheading an industry as a woman? What are they?

It’s a known fact that at a meta level, labor force participation of women in India is going down. 

Financial services are not doing great either. If there are 45 mutual fund companies in India and I do quick math, between the CEO role, the head of investments in equity, the head of investments in fixed income and the head of sales, which make the four major leadership positions, 45 companies, that means there should be 150 to 180 leadership roles for women in asset management in India. I don’t even think 10 are occupied by women. And for me that is a very, very alarming statistic in an industry where ideally 50% of your investors are women—even if those 50% are not taking investment decisions, which is a separate problem altogether. So I think we have a long way to go in terms of bringing more women into the asset management fold.

If you are talking about things like financial freedom, if you’re talking about empowering more women to be financially independent, which all of us are, it starts by having more investment and asset management leadership in our own industry. 

In terms of opportunities, I just think women leaders—not just in finance—can add so much more. I mean the world that we’re moving to is a world where hard skills are being replaced by automation, so it’s not about having an autocratic leader, it’s not about knowing how to code, it’s about learning how to lead with empathy, it’s about creativity, it’s about customer orientation. These are skill sets you learn at the dining table from your mother and grandmothers. So women have all the skills including money management. I don’t think there is a stamp of approval needed on women’s ability, naturally and anecdotally. 

In terms of challenges, there are multiple. The one challenge is the one that everybody talks about which is around maternity and a lot of women dropping out. 

The second is a challenge that is not much talked about which is cultural. I don’t think films and pop culture do a great job of portraying financial services in a way that is attractive to a woman. You portray financial services as a very alpha male, dog-eat-dog culture, and I think for men or women both, the industry is not like that. Money management is a very responsible industry where most of the people in this industry are very cognizant of the responsibility of managing other people’s money, and I don’t think they are behind Bloomberg screens to be effective money managers. There are small things we can do to fix it. 

Do you think the heydays for the mutual fund industry have arrived, or they are yet to arrive and why?

I actually don’t love the concept of heydays, whether for mutual funds or whether for financial services in general. One of my challenges with the industry is that it is very, very cyclical, and capital markets are very cyclical, and more cyclical are the investors and young people are far more cyclical. India is a very, very emotional country; we live at extreme. So it is either achche din aa gaye hain (good days have arrived), let’s put all our money into the market, or everyday is finished. 

I would love to see an industry and an investor pattern that is far more balanced and moderate. You know markets move up and down like this, the money management experience can be a lot more sturdy. So for us the heyday is when people are constantly embracing mutual funds as a way to say they’re investing, and they’re staying invested. So for me, heyday is not getting lots and lots of flows in a single year. For me it’s years of seeing consistent growth in that and consistent growth is highly encouraging. 

What are the key things that will bring moderation in the way Indians manage money?

The two biggest challenges for us as an industry are to add a number of investors, for sure. I mean two crore is just not a good number of investors. The second is to make sure those investors stay invested. And that responsibility is on asset management companies, on the advisory fraternity, on the regulators, and on the ecosystem of course it’s on investors. It is to either build products, or to communicate in a way that investors coming into funds and stay invested, because unfortunately what you see a lot is investors coming in when markets are doing exceptionally, markets having a bad run, which is inevitable, and investors running away and getting disillusioned by their mutual funds, that is a bad outcome. 

One of the things that I’ve been trying to advocate at Edelweiss and at an industry level also is to build products that bring consistency in investor experience. The average Indian investor wants products where he makes some kind of money, it does better than a fixed deposit account. But when things are really bad, the world doesn’t come to an end. For more muted products, asset allocation products, things that can give people a consistent experience, the popularity of that is something that will tremendously help our industry, because our biggest challenge is to get investors and keep them invested.

What is the most exciting aspect of the Indian markets compared to other markets? 

It is the opportunity to do things at scale; it is the opportunity to fix the basics at a large size. I spent about 10 years in the US market, and people often ask me how I compare the two markets: The US market is a far more financially literate, evolved market, but I would say you’re solving a third of our problems. 

In India, you’re solving very basic problems. We still have the Prime Minister asking people to open bank accounts, we’ll have people who don’t know what a mutual fund is. So you are solving very, very basic problems, but who have the ability to solve them in size, and that is a tremendous combination.

So the degree of impact that you have is very large. 

What has been your motivation to move from the US to India?

My motivation has changed over the last 15 years. When most young professionals start their career, they are motivated by career growth and friends, money and all these things. At some point I got motivated later in my 20s by successful clients building out business, and then I had a phase a few years ago when I started realizing my motivation is seeing people grow. And now my broader motivation is impact. 

Everybody has an inner scorecard as to what matters to them, and for me that inner scorecard and motivation is the impact. The most heartening messages for me personally are when a customer writes: You know, I can trust you. Influence on people’s lives is tremendously motivating. 

What has empowered you to become who you are today? 

My father was born in a village in Uttar Pradesh, and he ranked seventh in the Indian Administrative Services, and he probably still works much harder than I do. My mother is the head of a large educational institution in Delhi and probably works much harder than I do. I come from a great sense of values and a tremendous backbone, and there has always been this talk that work is worship and keep working hard and keep challenging your circumstances. 

My father always says that each generation should make a quantum leap. I grew up in a village, and I was able to crack the civil services, then at least I was able to make a leap. If you were the first one to be educated abroad, then at least you have made a leap for your generation. I’ve always found that very empowering. 

The second thing I got from home is a constant ability to change and move forward, because we moved countries so frequently, in fact I get bored very easily. So, the constant desire to change and set benchmarks, I find that very empowering. 

On the work front, I have a wonderful team, and I find myself very blessed to have them. 

What is your message to your peers in the financial services industry?

One input I would give to everybody is that when we think about building Indian financial services, there a great amount of talk going about “Atmanirbharta” or self-dependence going on these days. We should build it for ourselves, we should not build it on a western narrative. 

We should build regulations, laws and products for our market. I get very annoyed with the constant desire to benchmark what is going on in the UK, or in my industry with no disregard to, you know, picking up narratives from western successful investors. I think India is a very unique country, very unique in its state of evolution. And  whatever we build as an ecosystem should be built for our market. 

What would you change the one thing about the asset management industry in India?

The one thing I would like to change about the industry is the cyclicality of the industry. Financial services have a reputation for being very momentum-oriented. We stretch the line in good markets, we overhire in good markets, and in bad markets, it is just the opposite. I would love to see it be a far sturdier industry, than such a cyclical industry.