At the current AUM, the industry is likely to spend Rs 149 crore annually in educating investors about mutual funds.
Fund houses are required to set aside two basis points from their net assets, which at current AUM translates into Rs 149 crore annually, towards educating investors. Marketing pundits believe that if utilised well, it could, besides increasing investor awareness, also help in the expansion of the market for mutual funds which is somewhat stagnating for a variety of reasons.
Out of this Rs 149 crore, the top 15 AMCs which hold 88% of industry’s assets will account for a major chunk of the industry spend. The next 29 AMCs will spend Rs 18 crore.
So far, AMCs have been conducting five investor awareness campaigns every month at AMFI’s behest. According to AMFI, from May 2010 to August 2012, 36 AMCs have conducted 22,765 programs in 405 cities covering 766,670 participants. AMFI, with contributions from AMCs, had also run a media campaign last year to promote mutual funds. One possible way to utilise the two basis points is to pool resources and run a similar campaign on a bigger scale.
Many believe that AMCs need to change the way the awareness campaigns are conducted. “AMCs should be careful of spending the money in a very useful manner. Awareness programmes should be carefully thought through. It’s not just about putting billboards. We can do many meaningful exercises. It could be a joint initiative with AMFI. The cause is good and we utilise the money well the end results will also be good,” says Karan Datta, National Sales Head, Axis Mutual Fund.
With the regulator’s push to penetrate small towns, AMCs could also channelize this money in spreading awareness beyond the top 15 cities. “The expense ratio has been increased so we should not complain. Investor education is important. It will not affect AMCs since we are allowed to charge more expense now. We have an incentive of 30 basis points for inflows from smaller towns. We should focus on increasing penetration. The industry needs to change the way these investor awareness campaigns are currently conducted,” said a sales head of a large fund house.
Lately, AMCs like ICICI Prudential, IDFC and Kotak are reaching the masses through short films with an underlying message to save for the future through SIPs. UTI has started one of the largest investor education initiatives called Swatantra while DSP BlackRock is aiming to spread financial literacy among women.
Some in the industry were
of the view that liquid money should not be counted for two basis points spend.
However, others clearly had a different perspective. “AMCs have done FMP and
liquid fund business at wafer thin margins. AMCs should be careful in doing
business which makes money,” says a marketing head of a mid-sized AMC.
Currently debt funds account for 74% of industry’s assets.
Investor awareness budget for top 15 AMCs
