Mutual Funds aim at five-fold increase in assets by 2025

Recent growth encouraging, but challenges remain

The Rs 20-lakh crore domestic mutual fund (MF) industry is eyeing a near fivefold increase in assets under management (AUM) and an over three-time jump in investor accounts over the next eight years. Industry body Association of Mutual Funds in India (Amfi) has set a target of Rs 95 lakh crore AUM and 130 million investor folios by 2025.

Although the target appears steep, the growth in the past five years has buoyed expectations. The industry AUM have grown nearly three times since 2011-12, a compounded annual growth rate (CAGR) of 23 per cent. Industry officials say the continuous investor awareness programmes are helping to get new investors into the MF fold.

A Balasubramanian, chairman, Amfi, and chief executive officer (CEO) of Birla Sun Life Mutual Fund, said, "The projections in terms of asset growth are actually quite achievable. Of course, we have taken into account the market appreciation of the assets — both debt and equity. Awareness programmes have really worked and Amfi will step up such engagements of investors and distributors. We have tried to bust several myths around mutual funds and want it to be part of everyday conversation.”

Monthly investments from systematic investment plans (SIPs), which  had dipped to below Rs 1,000 crore in 2008, has now hit a record high of Rs 4,500 crore.  Officials expect SIP investments to only go up from current levels.

Kaustubh Belapurkar, director (fund research) at Morningstar India, said, “Impetus should be on increasing the number of individual investors. It will help in deepening and broadening the market. Today we are at a stage where the US was in the early 1980s. Investors are maturing and not reacting in knee-jerk way to events like Brexit or demonetisation. It suggests MF investors are making long-term investment."

The recent trends may give the industry hope but the growth has come at a time when the stock markets have done well. Experts say the strength could be tested if the markets go into a prolonged correction phase.

"Market cycle is something which no one can predict. Though this projection is based on the 20-plus CAGR in the past few years, the same growth can't be taken for granted. However, given the momentum of flows, investors coming in from smaller cities and towns and the expected positive economic growth in the years ahead, reaching targets by 2025 is possible,” said G Pradeepkumar, CEO, Union Mutual Fund. 

India currently has about 86,000 MF distributors. Following the 2008 financial crisis, the distributor count had dropped from 100,000 to 40,000 due to weak market conditions and tightening of regulations. Industry players say there are only about 12,000 active distributors, which may not be enough to cater to the needs of new investors.