The mutual fund industry’s asset base could touch Rs 45 lakh crore from the current Rs 22 lakh crore in the next three years if it continues to grow at the current pace, believes N S Venkatesh, the chief executive officer of the Association of Mutual Funds, or AMFI. “There is an opportunity for the industry to grow faster than this due to the demographic advantage and the growing working population,” he said. He noted that the younger population is showing a preference for financial savings and distributors need to attract these investors towards mutual funds.
He believes that product innovation and regulatory support will pave this growth. “The industry has grown rapidly over the last four years. The regulatory environment is conducive for growth as the regulator has given a safe harbor for the industry to develop. Fund houses will have to ensure that they innovate their products to meet the requirement of different investors,” he said.
Speaking at the Network FP Conference today in Mumbai, Venkatesh said that these trends bode well for advisers and advised them to use technology to capitalize this opportunity. From ‘push’ products, he believes mutual funds have the potential to become ‘pull’ products going ahead. “At this juncture, advisers are educating investors to invest in mutual funds. Three years down the line, prospects will come to them to invest in mutual funds. When the markets explode, distributors have a big opportunity,” he said.
To expand the market, Venkatesh advised distributors to focus on beyond 15 (B15) cities where the real wealth is concentrated. “Aadhar, Jan-Dhan Yojana and mobile phone revolution are helping in inclusion. To bring the bottom of the pyramid in mutual funds, we need to ensure that the the cost of operation for advisers is low and technology can be an enabler here,” he said.
Venkatesh said that channelizing retirement savings in mutual funds could be a game changer: “The U.S. mutual fund industry has grown exponentially after retirement savings were channelized in mutual funds through 401 K plans. If this happens in India, our industry will also grow at a faster pace. The Employees' Provident Fund Organisation, or EPFO, has already started investing in equities through exchange traded funds, or ETFs.”
