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The MF industry has witnessed tremendous growth over the last 5 years. This was due to a confluence of many favourable factors – market rally, AMFI ‘MF sahi hai’ campaign etc. How can the industry sustain this growth and ensure that this momentum remains intact?
The MF industry has grown to Rs. 68 lakh crore. However, despite the impressive growth, MFs have only 5 crore unique investors. So, the penetration of mutual funds is still very low and there is a lot of potential for growth.
The proportion of household savings in equity is around 6%, which is also an opportunity for growth.
While India is the most populous country, it is also the youngest. Our GDP per capita is at $2,500 and has high potential for growth. The proportion of the population who are HNIs and upper middle-class is at 25% now and is expected to be above 50% from 2030 onwards. This shows that there is clearly going to be a surge in income. If we put all these things together, it is up to the industry to decide how much it wants to grow.
What are the main opportunities and challenges for the MF industry in the days to come?
One of the biggest opportunities is in the fixed income market. Out of the entire MF AUM, less than 25% is in fixed income funds. Even simple products like liquid and overnight funds can give good experience to investors who are only focused on traditional assets like savings accounts.
Hybrid funds also present a big opportunity. They take up less than 15% of the total AUM. It provides solutions, which can become a part of their asset allocation.
The challenge is to convince investors to invest in fixed income and hybrid funds. Also, it is important to convince investors to start an SIP for the right amount to achieve their goals. Another challenge is also to nudge investors to prevent SIPs from premature redemption and fulfil their goals. If we work on these challenges, they can contribute to exponential growth.
Despite volatility in the markets, SIP inflows have still been high. Why do you see this trend continuing?
Due to the awareness created by the industry, investors know about the importance of long-term investing and the power of staying invested. A lot of investors are confident about India’s growth story. This has led to them investing in domestic markets and in equity. A lot of investors have also become aware about the power of compounding. This is why investors are allocating their corpus in SIPs to meet their financial goals.
Canara Robeco MF derives a substantial proportion of its assets from distributors. Can you elaborate on the initiatives you have taken for your partners which has led to this growth?
We have taken a lot of initiatives for them. One of them is the smart MFD platform, which offers support to distributors who are at an initial level of growth with pre-sales tips and automated social media posts. It has a CRM platform enabled to access and manage leads. In addition, the platform also offers post sales service, where MFDs can raise service requests before registrars.
Another initiative is our live online training program called ‘Grow Your Business 50x’, which covers different aspects of their business like investing people, process, technology, customer management, business development from industry veterans.
Canara Robeco MF has recently launched a goal SIP. Can you tell us more about it and how is it different from a normal SIP?
SIP is a structural product but it has a gap in it. Every investor starts an SIP with a short or long-term goal in mind like buying a car or house, children’s education etc. However, once an investor signs up for an SIP, there is no tracking of that goal. Goal SIP is an innovative solution where investors can name their SIPs based on their goal. The account statement will capture the goal amount, duration, name and the progress of the investor on the goal. This nudge can help investors to make an emotional connection with their goals and become committed towards them.
What is your message for your distribution partners?
The distribution partners usually talk in terms of AUM. Instead, they should focus on goals under management. This gives them a better perspective on their potential for growth over the long term and invest in the business appropriately.
