In the last decade the Mutual Funds industry has seen tremendous growth and successfully faced challenges. Yet, it has still not found mass acceptance because a grassroots investor does not know the place of Mutual Funds in the hierarchy of his savings. It is time for the industry to consciously brand itself as a different asset management class altogether and as a long-term investment destination to enter the mind of the people by finding a place in the hierarchy of savings, said Mr. U K Sinha at the 10th CII Mutual Fund Summit 2014, a flagship Confederation of Indian Industry (CII) Summit now in its 10th year. The theme for this year is, Indian Mutual Fund Industry: Challenging the Status Quo- Setting the Growth Path.
Sinha also informed that the year 2014 marks the 50th anniversary of the Indian Mutual Fund industry because it was in 1964 that the industry began with the birth of UTI. Today the industry has reached Rs. 10 lakh crore of assets under management with around 4 crore accounts in the 50th year and that too at the time of the 10th edition of CII Summit is cause for satisfaction, he said.
The time, according to him, was also ripe for the mutual funds industry to introspect and find out a way to improve its perception in the minds of the masses, to encourage them to look at Mutual Funds right after their banking needs.
The Mutual Fund industry has to look at a long-term policy. There is clear-cut message to do this: the industry has to position itself as one that mobilizes long term family savings. Some of SEBI guidelines and recommendations are guided by thinking on those lines, Mr. Sinha said.
Sinha added that SEBI has recommended to the government that the public sector undertakings should park money in asset management companies, but not just in the public sector ones. He expressed satisfaction that the policy pushed by SEBI for the industry to go beyond the top 15 cities, have begun to show good results and the money mobilized and people serviced in rural India has gone up. Yet, there is a long way to go and much potential to be realized.
Comparing benchmark indices Mr. Sinha said, 80% of assets under management have performed better than the indices out of which more than 50% have outperformed by a margin of 5% or more. He also complemented and congratulated the industry on the way it handled itself during the crisis last July when interest rates went up all of a sudden. The way the industry handled itself shows the robustness and maturity of the industry. In any other market of the world, including some of the best, such a situation would have been catastrophic, he said.
Speaking about debt-schemes where the availability of corpus was limited, Mr. Sinha said that SEBI has raised the minimum threshold to 20 crores and has given the industry a period of one year to comply with the same.
Sinha stressed upon investor education in growing the market so it could reach its full potential. He urged the industry to focus on the quality and the manner in which the programs are conducted.
Uday S Kotak, Chairman CII Financial Sector Development Council and Executive Vice Chairman and Managing Director, Kotak Mahindra Bank Ltd., echoing Mr. Sinhas sentiment said, It is time for the industry to change its traditional mindset to that of thought leadership, to rise above narrow perspective and to think of the sector as a whole.
Kotak also said that the period between 2003-08 saw a strong emergence of issuer-investor model of savings. However, since then it has gone back to the savers-borrowers model. Also he said, Indians were investing more in physical assets than in financial savings. Besides a few external factors responsible for this, a lot of internal practices of the industry have also been responsible, he said, adding that it is time for the industry to come together and relentlessly focus on converting the saving of Indians into financial savings.
A CII-PWC report titled, Indian Mutual Fund Industry: Challenging the Status Quo Setting the Growth Plan was released Mr. U K Sinha. The report states the asset management industry is poised for significant expansion. As per the report, asset under management (AuM) will rise to around $101.7 trillion by 2020 from a 2012 total of $63.9 trillion. It also finds that assets under management in South America, Asia, Africa and Middle East economies are set to grow faster than in the developed world in the years leading up to 2020, creating new pools of assets that can potentially be tapped by the Asset Management industry.
A Balasubramanian, Chairman CII Mutual Fund Summit 2014 and Chief Executive Officer, Birla Sun Life Asset Management Co. Ltd., said, There is a lot that the industry stakeholders can do collaboratively to amplify the strength of distribution and move forward the product into the market. It is important for the industry to now position Mutual Funds as a long term investment vehicle.
Sundeep Sikka, Chairman Association of Mutual Funds in India (AMFI) and President and Chief Executive Officer, Reliance Capital Asset Management Ltd., said that the mutual funds industry has the potential to reach 20 lakh crores in the next five years.
He credited the regulator stating that they nudged the industry in the right direction so that today we are at a place where it can take a quantum leap. Market need triggers and the efforts of SEBI have been instrumental in the growth of the industry, pushing it beyond the 15 key cities, improving investor education, pushing the industry to play active role to represent minority share holders etc.
R Mukundan, Immediate Past Chairman, CII Western Region and Managing Director, Tata Chemicals Ltd. reflected on the 10 year journey of this flagship CII summit. It has been a magnificent journey for the industry as a whole and with CII being part of the journey in all its success and shortfalls. In the last 10 years, CII has seen the industry mature and grow and it has provided a strong platform to the industry stakeholders like the regulator, the fund houses and distributors to come together and debate over current industry issues and address the challenges.
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