As we enter 2021, many fund houses believe that the MF industry will see more retail participation especially from smaller cities. Other trends that they expect to gain traction in 2021 are greater adherence to asset allocation and entry of new players. Here are a few key trends that can dominate the mutual fund industry in 2021.
Portfolio construction
After witnessing a roller-coaster ride in their equity investment in 2020, investors are likely to focus on asset allocation and diversification. This means not only investors would focus on investing in other asset classes such as debt or gold, they will also look to diversify their portfolio within a particular asset class. For instance, investors may opt for a combination of active and passive strategies and invest in funds that take exposure to international stocks.
Ajit Menon, CEO, PGIM India MF told Cafemutual that the low interest rate regime will lead investors to seek equity investment in 2020. He, however, believes that investors will protect their downside with asset allocation and diversification in 2021.
Swarup Mohanty, CEO, Mirae Asset MF feels that year 2021 will begin the trend of acknowledging the passive strategy in the core portfolio. “Investors will invest in a combination of active and passive funds to grow wealth in 2021.”
Another key trend would be exposure to international stocks through mutual funds. Ashutosh Bishnoi, MD & CEO of Mahindra Manulife MF said that the industry has started offering products that give investors exposure to international investing. This trend will gain traction in 2021. He also said that investors will also increase their investments in real estate and multi asset funds for better diversification.
Entry of new players
SEBI’s relaxed norms on who can foray into MF business can attract many fintech players. Until now, the regulator required entrants to demonstrate three years of profitability and maintain a net worth of Rs 50 crore. However, SEBI has now done away with the profitability norms. Now, companies will be eligible to sponsor a mutual fund if they have a net worth of Rs 100 crore.
Sunil Subramaniam, MD at Sundaram MF feels that these relaxed norms will attract many fintech players to start their mutual fund business. “Now that it is not mandatory to show 3 years of profitability, many fintechs can enter the MF industry. The entry of new players could also lead to mergers and acquisitions,” he said.
Wider participation using technology
With more new players and use of technology, the year 2021 could witness increased participation from the remote areas of India and young investors.
G Pradeepkumar, CEO at Union MF feels that the industry has swiftly moved to digital transactions and virtual communication in 2020. This will pave the way for MF industry to reach out more investors in the hinterland in 2021.
Bishnoi said that the MF industry will penetrate deeper into smaller cities with the message of consistent investing via SIPs. “Delivering the message in the local idiom and more intensive coverage through feet on the ground will be the key to increase penetration in B30 cities. Further, the industry will focus on improving digital efficiency to attract millennials.”
