The Hindu Business Line : MFs still to reach out to retail base

THOUGH 2004 was a stellar year of sorts for the mutual fund industry, it would be remembered as one where the objective of enlarging the retail investor base remained pure rhetoric.

While the total assets under management of the industry grew 13 per cent between November 2003 and 2004, fund houses registered conflicting movements in size. Prudential ICICI Asset Management Company (AMC), for example, ended this November with Rs 598 crore less than the corresponding period in 2003. Birla Sun Life AMC's assets under management also shrank to Rs 8,759 crore from Rs 9,104 crore, during the year.

According to Mr Pankaj Razdan, Managing Director, Prudential ICICI, 2004 was a year of preparing the house for achieving scalable growth. "This year, we had internally focussed on making investments into our people, processes and technology. Having completed this, we are now ready to get into a phase of quantum growth," he said.

Conversely, 2004 marked a period of exemplary growth for some fund houses. HSBC AMC nearly doubled its assets under management to Rs 7,195 crore. Tata Mutual Fund also marked a year when it came out to play with the big boys, with AUM of Rs 6,044 crore as on November 30.

Mr Sanjay Prakash, Chief Executive Officer, HSBC AMC, can barely hide his glee when he calls 2004 "the best year ever". "We stuck to our philosophy of offering simple products. Our product performance has been stable and though the bond side of the business was a bit disappointing, we are happy with the returns we posted on our equity and liquid products," he said.

The area of focus across the industry for 2005 continues to be one of enhancing retail participation. While HSBC AMC plans to open 11 more centres, to augment its current eight, Tata Mutual Fund is looking at having 50 centres in 2005, as against the current 30.

AMCs are divided about their product strategies for the coming year with some poised to design new products to suit new customer bases and the others preferring to stick to a few tried and tested vanilla products.

Year 2004 was one that witnessed severe consolidation in the industry. Principal AMC (now Principal PNB AMC) concluded its acquisition of Sun F&C during the year. UTI AMC took over the funds of IL&FS AMC and soon Birla Sun Life AMC would complete the acquisition of the funds of Alliance MF.

Consolidation does not seem to be a high priority for fund houses in 2005. Though most AMC CEOs say that they will not turn down acquisition opportunities if they come by, they are not actively looking for sellers.

ABN Amro started its asset management operations in India in June this year. Fidelity, the world's largest fund house, also received its in-principal agreement from Securities and Exchange Board of India (SEBI) later in the year. The influx of foreign fund managers is expected to continue with SEBI understood to be evaluating several applications.

With debt markets expected to improve by mid-2005 and equity markets continuing to be positive in sentiment, mutual fund houses expect a challenging, yet exciting year ahead.

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