Retail investors have been the key drivers of mutual fund industry in the last few years. Retail AUM grew at 31% year-on-year since 2014, shows the latest CII and McKinsey report titled ‘India Asset Management: Coming of Age’. A major portion of the retail AUM growth (84%) came from inflows while the rest came from mark to market gains.
The trend reversed in institutional segment. Here, only 37% of the growth came from inflows. The institutional AUM grew at 23% (y-o-y) during the period.
Overall, the industry grew by 27% y-o-y to reach Rs. 21 lakh crore in March 2018. Over 65% of this growth was contributed by increased inflows while the balance 35% came from performance of the funds. Analysing the data further, the report found that 45% of the inflows came from equity funds. The impact was even more pronounced in retail segment where 65% of the retail flows were in equity funds.
Majority of growth primarily driven by inflows; retail segment outpaced institutional growth
Overall AUM
Indexed to Mar 14 total AUM
The AUM growth has been complemented by growth in profitability, says the report. The profit margins grew by 47% of in the last four years (covers around 80 percent of the industry AUM with 18 participants in annual McKinsey India asset management benchmarking).
In absolute terms, there has been a massive growth in profit pools by around 3.5X compared to the FY 2014 levels as per the report. Around 80% of overall cost reduction was contributed by better efficiencies in middle back office sub function due to economies of scale.
