In 2013, Leo Puri took over the reins at UTI Mutual Fund as Managing Director, and was subsequently elected as Chairman of the Association of Mutual Funds in India (AMFI) last year. In an exclusive interview with BW Businessworld, Puri talks about how the industry needs to evolve in order to improve Mutual Fund penetration within Indian households, on whether retail investors should opt for direct or regular plans, and on how first time investors should go about investing in Mutual Funds.
Despite them being such an outstanding vehicle for Wealth Creation, the penetration of Mutual Funds amongst Indian households is still woefully low compared to Life Insurance and Bank Deposits. How does the overall ecosystem need to evolve in order to improve upon this?
In order to improve upon this, the industry needs to collectively address three points. Firstly, the performance and benefit of investing in Mutual Funds isn't very well known in India, including the fact that most high performing Mutual Funds tend to outperform equity benchmarks handsomely. Much better communication regarding the performance, cost effectiveness and value proposition is needed. Secondly, there's a conception that these products tend to be complicated, and hence there's a need to 'simplify' mutual funds in the eyes of a client. This can at least partly be achieved by improving investor education & awareness, so that clients understand that though the industry may sometimes complicate these products, the underlying financial concepts related to Mutual Funds are really quite simple, be it related to debt, equity or balanced funds! Thirdly, a stronger platform for distribution and intermediation needs to be built up. Some initiatives such as universal KYC (an equivalent of a 'jan dhan') are in fact round the corner, and we should be seeing more such initiatives going forward. These three points, if properly addressed, can push the Indian Mutual Fund industry ahead multifold in the next five years.
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