Retail investors are better informed and savvier now than they were five years ago, says Jaideep Bhattacharya, Managing Director of Baroda Pioneer AMC. He’s also the Chairman, AMFI Committee for Financial Literacy. Pulling in investors from smaller cities requires a lot more effort in investor education than in the larger cities, he says. Excerpts from an interview:
How has the retail interest in mutual funds changed in the past few months?
Our folio counts dropped from 4.28 crore in March last year to 3.90 crore this April. But in April alone, we have seen the equity folio count rise by three lakh.
Retail behaviour in mutual funds is, in my opinion, becoming more mature.
Essentially, retail investors are coming into the markets which are rising and which have a little bit of sustainability.
Do they all come in at the bottom and go out at the top?
No. But they are far more knowledgeable than five or even three years ago.
They have more information and more distributor advice; their level of awareness has gone up significantly.
Where is the money flowing into?
As of now, most of our inflows are coming into our liquid funds — in April for instance, we have seen a net inflow of ₹1.2 lakh crore, entirely into our liquid fund. In gilts, we have seen 28 per cent steady growth, thanks to the recent rally in the G-Secs market. We have also seen an uptick in inflows into the PSU Equity and Growth Fund. In fact, three-quarters of our SIP inflows are in equity. We are also seeing increasing interest in equity, especially from the HNI segment.
Our view is that over the next three years, equity will be a strategy for most fund houses. This action will be in both domestic and international funds.
How are you building up your base of investors outside the top 15 cities?
More than 60 per cent of our incremental folios are coming from B-15 (beyond the top 15) cities. Distribution is the key. Attracting new investors in small cities does not come cheap. About 75 per cent of all financial advisors are located in just a fifth of the country’s districts. So, investor education is also important.
Is investor behaviour different between large and small towns?
Large-town investors are better informed and have access to multiple distributors. Also, in large towns, investors have options of multiple sources for closure, while in small towns you need a strong distribution tie-up to penetrate. We have seen longer longevity of assets from the smaller towns.
What do you make of SEBI’s ruling on minimum networth for AMCs?
We increased capital in 2013. It’s good to have your skin in the game; it will help in building investor confidence. Fund houses which have an expansion strategy and a good product fleet will be more than happy to conform to the rule. The penetration of mutual funds has been low. With 1.26 billion people, we need a larger participation.