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  • MF News Post Covid 19, investors give asset allocation a miss: Cafemutual Survey

    Post Covid 19, investors give asset allocation a miss: Cafemutual Survey

    Retirement is top priority for clients followed closely by children’s education/marriage. This is among the many interesting findings about investors and mutual fund distributors (MFDs) from the 4th Cafemutual Nationwide Study.
    Team Cafemutual Jan 22, 2021

    Covid 19 is not just a health crisis, it has severely affected how investors look at their money and make investment decisions. 

    In a recent survey conducted by Cafemutual, 28% of MFDs said that most of their clients did not make changes to their investment portfolio to maintain asset allocation. Another 47% MFDs said that some of their clients chose not to maintain recommended allocation. Just 25% MFDs said their clients have rebalanced investment portfolio to maintain the pre-covid allocation.

    Another key impact of Covid 19 has been on SIPs. The loss of jobs and salary cuts has had a fallout on the continuation of SIPs - 62% of MFDs saw some pause (58%) or widespread pause (4%) in SIPs.

    Amidst the pandemic, there was some flight to safety as evidenced by the shift from equity mutual funds to debt funds - 65% of the MFDs saw some (59%) or widespread (6%) shift in allocation from equity funds to fixed income funds.  Similarly, 69% of the MFDs saw widespread (47%) or some (22%) shift in allocation from mutual funds to safer havens of bank deposits/cash.

    The survey covered 1256 financial intermediaries including mutual fund distributors and Registered Investment Advisers across 24 cities. While 861 respondents are from top 30 (T30) cities in the country, 395 intermediaries belong to beyond the top 30 cities (B30) cities. These distributors represent a cross-section of the MF industry.

    Here are the key highlights.

    Retirement is top priority for clients followed closely by childrens education/marriage

    The other customer goals are (in this order): to protect themselves against an uncertain future, to fund the purchase of a house or car in future, to protect their wealth and to earn tax benefits.

    Indian investors risk averse across age groups, feel MFDs. Even among millennials, just 39% of investors are seen as aggressive.

     

    Millennials (%)

    40-54 years (%)

    Above 55 years (%)

    Conservative

    26

    33

    45

    Moderate

    35

    37

    33

    Aggressive

    39

    30

    22

     

    100%

    100%

    100%

     

    Investors are mature now

    If the markets were to fall by 25% or more, 31% of MFDs were confident that there would be very few redemptions; in fact, another 28% of MFDs were confident that they would take advantage of the dip to buy more. A further 31% felt that investors would continue with SIPs though lump sum investments would dry up.

    What is the criteria in brand selection?

    Investors give maximum weightage to reputation of the AMCs to invest in mutual fund followed by name of fund manager, past track record of the scheme and uniqueness of the theme or investment strategy of the fund house.

    However, six out of ten investors rely primarily on distributors to select funds.

    Deterrents to investing in mutual funds

    Poor perception, low awareness, and complexity of mutual funds are constraining the growth of the mutual fund industry.

    • Many investors have a poor perception of mutual funds, say 58% of the MFDs 
    • There is a lack of awareness of mutual fund as an investment category among many investors, say 50% of MFDs.
    • The study finds that 48% of MFDs believe that many investors feel mutual funds are too complex and difficult to understand.

    However, the silver lining is that once they invest, investors have a positive experience with mutual funds - only 22% of MFDs feel that many investors have had a poor past experience with MFs.

    While the Mutual Funds Sahi Hai campaign has worked for the industry, (these scores are much better than those in our previous studies done 2& 4 years back), there is still a lot of ground to be covered if the industry has to reach its true potential and reach every household in the country,” said Prem Khatri, Founder & CEO Cafemutual.

    Future of the Mutual Fund industry

    Interestingly, 84% of the MFDs feel that active fund managers will continue to beat their benchmark indices and 83% of the MFDs were confident of their ability to pick the winners for their clients.

    While 43% of MFDs believe that MF industry will reach AUM of Rs.50 lakh crore (i.e. almost double the size in August) by 2025, another 40% feel that the MF industry will become a Rs.75 lakh crore (i.e. almost triple the size in August) industry.   

    Similarly, as many as 26% of the MFDs were confident their MF business would grow 5 times or more in next 5 years while 43% of MFDs said it will double the in next 5 years. 26% said their business would be at the same level and balance 5% were looking to exit the business in the next 5 years.

    Have a query or a doubt?
    Need a clarification or more information on an issue?
    Cafemutual welcomes all mutual fund and insurance related questions. So write in to us at newsdesk@cafemutual.com

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