Suresh P Iyengar

The asset under management of mutual fund industry is expected to touch ₹50 lakh crore in next five years from the current level of ₹30 lakh crore with increased financialisation of savings and rising per-capita income.

Making the prediction at the Crisil’s India Investment Research Conclave, Ashu Suyash, Managing Director, Crisil said equity funds are expected to vanguard this growth trajectory, with their share expected to rise from 42 per cent to 47 per cent, in line with global peers.

Passive funds will also emerge as a key driver registering a growth of 55 per cent although on a smaller base while retirement solutions will also gain traction, said Suyash.

The past couple of decades have seen mutual fund industry gain currency and create an edge for itself in the personal finance space and raise the share of Indian households in the overall savings pie.

Innovation is key

Nilesh Shah, Managing Director, Kotak Mahindra Asset Management Company, said the future growth of the mutual fund industry is bright as the current unique client code base of 25 million has the potential to touch 250 million if the population in Bharat and semi-urban towns are tapped with innovative products, gaining investors trust and confidence.

The regulator and mutual fund industry has to draw a fine line on quantum of disclosure as too much of disclosure will create unnecessary doubts in the mind of investors and scare them away, said Shah. A Balasubramanian, Managing Director, Aditya Birla Sun Life AMC, said the master stroke of SEBI to set aside a part of management fee for industry development and allow more expense for attracting inflows from smaller towns was one of the reasons robust growth in fund flow.

Pass through vehicle

With the growing awareness, he said investors have understood that ups and downs are part of market and mutual funds are just the pass through vehicle.

Appropriate and timely investor decisions are a pre-condition for holistic, sustainable growth of the domestic mutual fund industry. That, in turn, is a function of access to relevant and accurate, actionable information, especially at a time when regulatory persuasion is tilting towards advisory-type intermediaries.

Amish Mehta, COO and President, Crisil, said when selecting funds it is important for investors to look at the attributes of the underlying portfolio and not just focus on a performance yardstick like net asset value.

The CMFR (Crisil Mutual Fund Ranking) methodology does just that, which improves its predictive intelligence and relevance. For example, a high percentage of debt funds with significant exposure to defaulted papers since mid-2018 were ranked low at CMFR 4 and 5 – when the underlying papers defaulted – compared with the higher rankings given to them elsewhere based on just NAV, he said.