Job losses and salary cuts have taken a toll on the continuation of systematic investment plans (SIPs) by mutual fund investors, a survey has found.
Sixty two per cent of mutual fund distributors (MFDs) reported that they saw some pause (58 per cent) or widespread pause (4 per cent) in SIPs. There was a flight to safety as well, with 65 per cent of the MFDs seeing some (59 per cent) or widespread (6 per cent) shift in allocation from equity to fixed income funds. Similarly, 69 per cent of MFDs saw widespread (47 per cent) or some (22 per cent) shift in allocation from MFs to bank deposits and cash.
The findings are part of a survey by portal cafemutual.com that covered 1,256 financial intermediaries, including MFDs and registered investment advisers, across 24 cities.
However, 28 per cent of MFDs said most of their clients did not change their investment portfolio to maintain asset allocation. Another 47 per cent of MFDs said some clients chose not to maintain recommended allocation. Just 25 per cent of MFDs said their clients rebalanced investment portfolios to maintain the pre-Covid allocation.
Investors give maximum weighting to the reputation of AMCs before investing in MFs, followed by the name of the fund manager, scheme’s track record, and uniqueness of theme or investment strategy. However, six out of 19 investors rely primarily on distributors to select funds, the survey found.
Poor perception, low awareness, and complexity of MFs are constraining the industry’s growth. For instance, there was a lack of awareness of MFs as an investment category among many, said 50 per cent of MFDs. However, only 22 per cent of MFDs felt investors had a poor past experience with MFs.
Interestingly, 84 per cent of MFDs felt active fund managers would continue to beat their benchmark indices, and 83 per cent MFDs were confident of their ability to pick winners.
While 43 per cent of MFDs believe the industry will reach an AUM of Rs 50 trillion by 2025, another 40 per cent feel the industry could potentially triple in size.
Similarly, as many as 26 per cent of MFDs were confident that their MF business would grow five times or more in the next five years while 43 per cent of MFDs said it will double in the next five years.
Twenty-six per cent said their business would be at the same level and the remaining five per cent were looking to exit the business in the next five years.
Retirement remained the top priority for clients followed closely by children’s education/marriage.