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| Edited By: Anto T Joseph |Source: DNA |Updated: Mar 19, 2018, 05:35 AM IST
How important is retail in mutual fund industry?
In the mutual fund industry in India that manages around Rs 10 lakh crore in total, around 65-70% is from institutional investors and the remaining from retailers. In one year, they save around $600 million annually or $50 million a month. But the retail participation in the mutual fund industry till date is only $40 million. This shows how under-penetrated the industry is. Traditionally, Indians have been investing in real estate, gold and bank FDs. But now, we clearly see a big change happening in the way Indians invest. A lot of investments that went into physical assets are now flowing into financial assets. At Reliance MF, we see ourselves driving that change. We go into small cities and towns, trying to change the investment behaviour of the people. We are trying to get them an exposure to a new way of investing. The assured returns that bank deposits gave during previous years are on the decline as India is moving away from the high interest rate regime. In fact, as against the 8.5-9% rate provided by EPF, our equity-linked products (ELSS) have provided huge returns (in fact grown 70 times in 19 years). We have seen a gradual change in people moving to equity investments as they are providing much better growth. Retail will drive up volumes in the MF industry. Our mission is that every households should be a mutual fund investor. To achieve it, we are going as retail as possible. We are doing a lot of investor education and awareness programmes, and trying to launch products that are simple for investors to understand. We are also trying to get a lot of new investors into other asset classes such as debt.
You had professed that the mutual industry will cross Rs 20 lakh crore by 2020?
I said that in 2012. Today I say the industry will surpass that magical figure much earlier -- probably by 2017 or 2018. I see mutual funds playing a major role in wealth creation creating long-term value for investors in a country like India where there is no formal organised pension system.
Are you also bullish on international investors in India?
Just a month ago, we floated an India fund in Japan. We are getting good response and have already done more than Rs 500 crore. We are now evaluating options to float similar funds in some other markets as well. We clearly see that interest in India is increasing. A lot of foreign investors are investing in India and who were not investing in the country are seriously looking at India.
Do you expect money stashed abroad by Indians to flow back in to the country and into the MF industry?
The industry has very strict KYC norms, and any money coming into the industry will have to undergo the KYC procedures. At Reliance Mutual Fund, our focus is going to be retail investors.
How important is asset allocation?
Over the last few years, the MF industry, which was all only about equity investment, is attracting several investors in other asset classes. We are also driving a change with more investors coming forward to debt funds. We are trying to get a culture of asset allocation. During 2003-08, equities did an outstanding job, but 2009-13, it was flat. But debt funds did a killing during the second half of 2009-13, with a lower two-digit returns. Similarly, during 2003-13, gold had a spectacular rally, but recently fell. We see ourselves playing an important role in wealth creation for retail investors and trying to educate them to get the allocation right. A lot of investors even today do not know how important is asset allocation. We are trying to focus on retail investors in small towns and cities trying to change the investment behaviour.
What is your quick advice to retail investors?
One should not get disillusioned at the short-term market swings – up or down. It is important that they stay invested for a longer period. Stick to an asset allocation and keep investing with the right set of fund managers. We believe that with the corporate earnings going more than 15%, markets have the markets have the potential to give returns in excess of 20% over the next five years.
