The Assets Under Management (AUM) of the mutual fund industry is seen to doubled in the next 5 years, according to A. Balasubramanian, Chairman of Association of Mutual Funds in India. He is confident that the assets can still grow @20% for the next 5 years.
Currently, the total assets—equity and debt—managed by 43 active Asset Management Companies stands at Rs 19.04 lakh crore. This is three times of the asset base five years back.
Two factors , generally drive inflows into mutual funds. One has been the increasing shift away from physical assets like the real estate and gold because of poor returns. A good chunk of that money is now going into financial instruments, notably equities and mutual funds. The other reason has been some well-timed initiatives by the Securities and Exchange Board of India (SEBI) in 2012 to boost the mutual fund industry. The steps included abolishing exit load, allowing MFs to charge higher expense ratio for promoting in Tier II cities. SEBI also allowed service tax that was paid by AMCs to be passed through to the investors.
“Along with AUM growth, we have also seen growth in equity assets from 1.8 lakh crore in 2012, to 6.8 lakh crore,” says eloquent Bala.
According to the data on SEBI, the total folio count at the end of May stood at Rs 5.72 crore, 1.8 % higher than April.
With systematic investment plans or SIPs — adding Rs 5,000 crore per month, the industry is finally getting long-term money. The Chairman believes that rising number of SIPs are indicator of investors beginning to mature.
AMFI data shows that the MF industry had added about 6.26 lakh SIP accounts each month on an average during the FY17, with an average SIP size of about Rs 3,200 per SIP account.
Indian mutual funds have currently about 1.40 crore SIP accounts through which investors regularly invest in fund schemes.
SIP has been gaining popularity among Indian MF investors, as it helps in rupee cost averaging and also in investing in a disciplined manner without worrying about market volatility and timing the market. Along with ease of investing it also gives the diversification benefits, most investors prefer mutual funds to equities or bonds. AMFI as a body is undertaking nation-wide investor awareness programs to promote proper understanding of the concept and working of mutual funds, Balasubramanian said.
In March, AMFI had launched a media and communication campaign called “Mutual Funds Sahi Hai” which appears in different media such as TV, Digital, radio, print, cinema and outdoor hoardings in different languages. This campaign aims to position mutual funds as a preferred investment option for potential investors.
SEBI has also mandated mutual funds to set apart 2 basis points for investor education. Half of this amount is shared with AMFI for better utilisation of the funds.
About the industry challenges, Balasubramanian said mutual funds are gaining prominence in the overall investible instrument but at the same time there is a challenge in getting investors on board and getting them to comply with KYC norms.
AMFI is a mutual fund industry lobby and its aim is to protect and promote the interest of Mutual Fund and its unit holders. It regulates the process, processing fee, and agent commissions for its active registered Asset Management Companies.