Quantum AMC founded by Ajit Dayal, Chairman, Quantum Asset Management Company Private Limited (Quantum AMC) was started in 2006. Quantum Asset Management Company is India’s first dedicated, direct-to-investor mutual fund house.
Replying to IIFL, Jimmy A Patel says,"In 2017, we will see more focus on retail investors, who are already showing a lot of commitment and maturity. SIPs will occupy a commanding share. The AUM of the mutual fund industry is quite likely to cross the Rs 20 lakh crore mark."
How was year 2016 for mutual Fund industry in your view and what where the key developments in the year gone by? Did more and more people prefer the SIP mode of investing?
Growth is on the cards of the mutual fund industry in India. The year 2016 has already seen regained space in inflows in equities since the total net inflow in MF schemes reached at Rs 3.03 lakh crore in April-November of the current fiscal, as opposed to Rs 1.84 crore in the same period last year.
The SIP mode of investments has also gained its popularity with more than 1 crore MF SIP accounts according to AMFI. In order to bring transparency into the system, the Market regulator SEBI suggested 'commission disclosure rule' from October 1, 2016 which was indeed a positive move. It has been also interpreted by many as a strong push by the regulator to guide investors towards the direct plan - which comes with a lower expense ratio as it does not incur expenses towards distributor's commission.
Although ironically 2016 saw a surge in the total no. mutual fund distributors registered with AMFI. As on October 31, 2016 there are 81,133 MF distributors registered which effectively implies conclusion that there is balanced growth across Regular and Direct Plans of Mutual Funds.
Also with usage of digitalization likely to increase, investing becomes easier in mutual funds; for example the advent of C-KYC. This in the long term will help AMCs to penetrate in the B15 cities and reach out to more and more potential investors. Not to forget the ongoing wave of demonetisation and its impact on stock market is likely to linger for some time and may lead to more inflows into equities if the markets continue to be bearish. Market regulator’s focus on investor education seems to have helped with investors rightfully investing when there is dip in markets. Therefore we hope to welcome 2017 on a positive note when it comes to equity investments via mutual funds.
Where is the mutual fund industry headed in 2017 according to you?
In 2017, we will see more focus on retail investors, who are already showing a lot of commitment and maturity. SIPs will occupy a commanding share. The AUM of the mutual fund industry is quite likely to cross the Rs 20 lakh crore mark.
The mutual fund industry in 2017 could also continue to witness consolidation. Non-committal sponsors will exit owing to the stringent net worth requirement. Rising cost structure, mainly on account of increasing compliance and manpower costs, will strain economies of survival. However, with retail investors renewing their faith in Indian equities, we need more and more good and honest players in the industry.
We hope SEBI allows eligible individuals to start an AMC (like in banking sector RBI granted banking licenses to individuals - small finance and payments banks to further the regulator's objective of deepening financial inclusion). In the US there are some large fund houses which were initially started by an individual. Vanguard and Templeton, both mammoth fund houses today were started by John Bogle and Rupert H. Johnson, Sr respectively.
The last thing we want is a Mutual Fund industry where a cabal of large fund houses offers a limited choice to the investors. As stated earlier, RBI has already given a green signal to the banking sector by allowing new players to set up niche banks. This is a positive start in the finance industry and we look forward to the mutual fund regulator soon approving and making way for more and more individual investors to start an AMC in India!
What are your expectations from Government and SEBI when it comes to Mutual Fund industry development?
I look forward to the year 2017 with an aim to spread awareness about MFs. This can be achieved with the help of financial inclusion. The aim of the financial inclusion drive is to extend financial services to the large untapped population of the country. It is rather surprising that mutual funds - one of the most regulated, professionally managed and cost-effective investment options, with the potential to deliver high returns over the long term, have been overlooked by the government. All this, combined with the flexibility to make small-ticket investments make mutual funds ideal for retail investors.
That is essentially because mutual funds are considered as a risky instrument. One needs to understand that risks are unavoidable at large. However, there is a difference between undertaking manageable and unmanageable risks. Risks associated with products like mutual funds come under the former category. This is because mutual funds are well-regulated and professionally managed. SEBI’s stringent regulations that bind the mutual fund industry ensure that investors’ money is not misappropriated. Strict rules on commission disclosure help prevent misselling. Professional fund management gives investors the benefit of informed decisions, while systematic investment mechanism counters the risk of market volatility. All this, combined with the benefits of higher return potential, adequate liquidity and the flexibility to make small-ticket investments make mutual funds ideal for retail investors.