The Hindu Business Line : Funds’ assets under management record 40% CAGR…

Trust the venerable AMFI chief, Mr A.P. Kurian, to shock you with numbers. He did it the other day at a meeting organised by a leading chamber of commerce. Let us, in turn, share some of these with you today, an exercise that may well leave you a few dark thoughts on the real spread of the asset management industry.

But, first, a few positives. Mutual funds, considering the recent growth in their assets under management, have logged a CAGR of over 40 per cent in the last few years. Retail participation, whether you believe it or not, has considerably grown, accounting for roughly 42 per cent of the total. With NRIs’ contribution thrown in, the figure stands at a higher 48-49 per cent. SIP (Systematic Investment Plan) accounts have swelled notably, especially so in the last three years.

What then are the negative aspects? As Mr Kurian points out, there are 32 million MF accounts today – which does not compare favourably with the 500 million or so bank accounts that have been opened. The number of demat accounts too are more than just this.

Clearly, for all the advances recorded by equities, for all the technological developments that have taken place, for all the awareness that is setting in, the funds industry has remained a slow-coach of sorts. Incidentally, because of M&As within the industry, the number of players in India has not grown much; it now stands a shade over 30.

However, as everyone knows by now, this will soon change. Several foreign companies are trying to set up operations in India.

Swelling asset base

There is another silver lining. The industry’s contribution to the nation’s GDP (in terms of AUM) is on the rise. Last year, the AMFI boss has mentioned, a cool Rs 1 lakh crore was added to the total asset base. The current figure stands at Rs 4.85 lakh crore or thereabouts.

Yet, incremental growth has come at a huge price – it has all been very urban-centric. At the cost of repetition, let us reiterate that the top few centres account for an extremely large – unfair too? – portion of the whole. Take away what is contributed by the top 8 cities, and you will be left with just 20-22 per cent of the total kitty.

PAN constraint?

As things stand, the constraints within the system are far too potent to be ignored. For instance, fund houses just can not walk into the rural heart-land; there may not be adequate banking facilities available in remote places. Their investors have to have PANs. Good idea. How many well-heeled investors in rural pockets do you think have applied for PAN? The answer is obvious.

And so the story goes. On one side of the spectrum we are allowing PSUs to invest in funds in a more focused way, permitting funds to offer international products and letting them tie up with global players. On the other side we are being slowed down by all sorts of road-blocks.

The regulator is underlining the need for reviewing the sponsor-trustee-AMC structure. It is also blaming fund houses for being lazy and adopting lop-sided marketing practices, aimed at catering chiefly to the urban populace. Till such practices thrive, the urban-rural divide, as applied to the asset management sector, will never be bridged. And that, readers, is the bottomline.

Feedback may be sent to nilanjan@thehindu.co.in

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