BS BFSI Summit: Rs 50 trn MF AUM is just tip of the iceberg, say experts

The domestic mutual fund (MF) is set to hit the Rs 50 trillion asset under management (AUM) milestone. Industry players believe this is just the tip of the iceberg and the next Rs 50 trillion can be achieved in the next seven years. Growth from smaller towns, digital transformation, investor education and increased demand for investment products will be the key drivers for the growth. This was the consensus amongst industry titans at the Business Standard BFSI Insight Summit.

“Ten years back, we were just 10 per cent of the banking industry. We have now reached 24 per cent of the industry. By 2030, with the number of investors coming up, I believe we will be one-third of the banking industry and the industry AUM will reach Rs 100 trillion,” said Nimesh Shah, managing director (MD) and chief executive officer (CEO), ICICI Prudential MF.

At the end of September 2023, the industry AUM stood at Rs 47.8 trillion. The AUM had topped Rs 40 trillion for the first time in November last year. The assets have soared on the back of a post-Covid-19 rally in the markets and the spurt in retail participation, particularly from smaller centres.

“Around 17 per cent of the AUM is from beyond 30 cities (B30). But that is not the right reflection of what is happening, as the penetration in smaller cities has been much better now. Around 27 per cent equity AUM is from B30 and even incremental SIPs are now higher. About 55 per cent of the new SIP accounts are being opened in B30. But we have just touched the tip of the iceberg,” said Navneet Munot, MD & CEO, HDFC MF.

A Balasubramanian, MD & CEO of Aditya Birla Sun Life AMC, said the industry was at a stage from where it would only take off.

“We have moved away from focusing only on the large cities. About 25 per cent equity AUM is coming from B30. Our reach-out programmes are taking place in multiple languages. As more people are getting educated, more investments are coming. We are also moving from physical presence to digital presence,” he said.

“We should take some credit as the industry on where we have reached. The fact that we have such a retail investment book is a surprise to many outsiders,” said Radhika Gupta, MD & CEO, Edelweiss MF.

Gupta said the industry still had a long way to go as MF investing culture was yet to spread in a big way in our housing societies and colleges. She called for a growth in distributor count to 1 million to help in the next growth journey.

Speaking to Tamal Bandyopadhyay, consulting editor of Business Standard, MF CEOs discussed how to spread AUM growth from India to Bharat.

“Digital has helped us grow way differently. Reach has spread across the country to nearly 200 locations. Wherever we see reasonable bank deposits, we would be there,” Shah of ICICI Prudential MF said.

“The inflection point for the MF industry is here. We have been adding 8-9 million folios per year. Earlier, this used to take us years. With the help of technology, in the next 4-5 years, may start adding 40 million folios in a year,” said Swarup Mohanty, vice chairman & CEO, Mirae Asset Investment Managers (India). “Enjoy the ride called India. We as Indians are fortunate to sit on a 30-40-year growth story,” he added.

To benefit from MF investing, the experts asserted the need one needs to come in for the long-term, avoid redemptions unless needed and invest in right avenues.  

“The AUM has grown also because of the good run in the market. Net sales (net inflows) are much lower than the total SIPs due to redemptions; we need to do much more than we are doing now. We need to go deeper by explaining which fund is right for whom,” said D P Singh, DMD & joint CEO, SBI Mutual Fund.

“We are a structural growth story. Any redemption done today would be wrong, unless it is for a need,” said Mohanty, emphasising that investors look at the next 10-year growth story.

Another consensus amongst the MF heads remained the need to educate and promote MFs in the vernacular languages and a wider network of distributors.

“We need financial awareness among people. Investors have lost money in crypto, derivatives trading, and online gaming. We are lighting lamps and so we need to educate investors. We need to speak in the language people can understand,” said Nilesh Shah, MD, Kotak Mutual Fund.

Shah asserted the need for a level-playing field in terms of transparency, disclosures, and commissions.

On queries of establishing trust and transparency in the market with respect to front-running allegations in the industry, Munot clarified: “Failure is not about falling down but staying down. We would have countered several such challenges, and every single time we have strengthened the industry.  

“This is an industry that treats a Rs 100 investor and a Rs 100 crore investor equally. This is the most democratic industry,” said Gupta.