While the world is talking about pre and post covid era, it is clear that we will have to live with coronavirus at least for a while.
In fact, India has started unlocking its economy cautiously and gradually after more than 2 months of lockdown. In this context, we spoke to a few experts to understand the 5 key trends that will shape the MF industry in the near-term.
#1 - Demand for less volatile products will go up
Industry experts feel that heightened volatility due to coronavirus pandemic has led many investors to review their investments. In fact, many investors have shown their interest in investment products that can protect them from downside risk.
Ashutosh Bishnoi, MD & CEO Mahindra Manulife MF sees such a shift among investors. He feels that many investors will choose less risky and high quality investment products over return generating volatile products. In addition, many investors will follow a staggered way of investing to reduce risk of timing the markets and benefit from averaging.
In such a scenario, a major challenge for the MF industry is to break the assumption that all mutual funds are risky and long term products like equity funds. Awareness should be created that mutual funds also offer products across different time frames depending on the risk appetite of investors.
#2 - Optimizing cost
There is huge possibility that MF industry may face difficulty in increasing revenue due to uncertain economy and market conditions. In such a scenario, one of the key trends to watch out for will be how AMCs and mutual fund distributors (MFDs) manage their cost.
Ajit Menon, CEO, PGIM India MF feels that the MF industry should focus on optimizing cost instead of reducing it. This could be done by embracing digital technology, improving efficiency, cutting down on travel, trimming infrastructural requirements and so on. The objective should be to look at all aspects of cost optimization, said Menon.
#3 - Personalized engagement with clients
Currently, both AMCs and MFDs have been conducting host of digital events to engage with their target audience on a regular basis. However, these digital meetings lack personal interaction with target audience, which ultimately defeats the very purpose of engagement. Hence, AMCs and MFDs should shift their focus on engaging with their target audience on a more personal level, feels Bishnoi.
#4 - Understanding behavioural sciences
Another crucial trend will be the understanding behavioral aspects to connect with clients emotionally.
Menon says, “So far, most of us have focused on delivering numbers. While the performance numbers are important, I think ultimately when people are investing for goals and their lives, and especially in situations like this when things are challenging, we need to start acknowledging the emotional aspect of investing as well. And that means that you have to understand the science of behavioral management, which is currently understood only by a few advisors. Therefore, there is a need to get a little more professional about understanding the behavioral finance aspects of managing money.”
#5 - Increasing efficiency through digitization
G Pradeepkumar, CEO, Union MF feels that the move to digital transactions will be one of the key trends going forward. Just as many people are using phone and web based banking, MFs will also see a sharp rise in usage of technology for transactions, he said.
Swarup Mohanty, CEO of Mirae Asset MF says that the industry is likely to continue the efficiency obtained not only on the transaction front but on the communication front through digitization as well. He sees no reason why the virtual meetings which took off during the lockdown should not be the norm in future also.
