The Mutual fund industry is passing through testing times, with assets dwindling owing to withdrawals by banks and investors showing little faith in the long-term prospects of MFs. Fund houses are now going back to the basics: serving individual investors rather than chasing banks and companies for showing impressive figures of assets under management, something that the Securities and Exchange Board of India has been advocating.
Birla Sun Life Mutual Fund CEO A Balasubramanian said investors have to be educated about the need for "proper financial planning for long-term prospects and that they don't have a better vehicle than mutual funds to achieve it".
"We also have to tell them that they should consider equity for long-term goals," he said, adding that getting individual investors to understand this tenet is the only way forward for the MF industry. "Many mutual funds are working hard at it," he said.
A senior fund manager, who didn't want to be named, said: "If the regulator is going to stop banks and companies from investing in MFs in a big way, the only way out is serving individual investors." The MF industry has been facing the heat ever since the market watchdog abolished the entry load from August 1. This has effectively taken the incentive away from agents to sell MF products, fund houses feel.
"The energy is missing. The push factor is not there anymore," laments Balasubramanian. Many fund houses say distributors have started marketing unit-linked insurance plans (Ulips) instead of MF schemes as Ulips offer better commission to agents.
The attitude of retail investors is also not inspiring much confidence among fund managers. Since August, investors have been pulling out money from equity schemes. Equity MFs witnessed an outflow of Rs 2,464 crore in December, higher than the net outflow of Rs 814 crore in November and the reported net outflows for five consecutive months.
Besides, huge withdrawals by banks recently have also forced funds to review their business model. Banks have pulled out more than Rs 1,00,000 crore invested in MFs in a single fortnight of December. "The total assets under management (AUM) have dropped below Rs 8 lakh crore, mainly because banks tend to take money out of MFs during December. It is to be seen how much of it would come back since the RBI's observations about banks parking money in MFs," says Y Jawahar, vice president & head, distribution, Mata Securities.
Many industry watchers feel that the money taken out of MFs won't return to the industry entirely, as the RBI wants banks to start lending to companies rather than opting for an easy way out.
Industry players also believe that the talk of scrapping the tax advantage enjoyed by banks and companies in MF investments would dampen the sentiment. As of now, it seems, 'back to small investors' is the only mantra that can help funds rediscover their lost magic.
Source: http://timesofindia.indiatimes.com/biz/india-business/New-strategy-Mutual-funds-turn-focus-on-retail-investors/articleshow/5502795.cms
Birla Sun Life Mutual Fund CEO A Balasubramanian said investors have to be educated about the need for "proper financial planning for long-term prospects and that they don't have a better vehicle than mutual funds to achieve it".
"We also have to tell them that they should consider equity for long-term goals," he said, adding that getting individual investors to understand this tenet is the only way forward for the MF industry. "Many mutual funds are working hard at it," he said.
A senior fund manager, who didn't want to be named, said: "If the regulator is going to stop banks and companies from investing in MFs in a big way, the only way out is serving individual investors." The MF industry has been facing the heat ever since the market watchdog abolished the entry load from August 1. This has effectively taken the incentive away from agents to sell MF products, fund houses feel.
"The energy is missing. The push factor is not there anymore," laments Balasubramanian. Many fund houses say distributors have started marketing unit-linked insurance plans (Ulips) instead of MF schemes as Ulips offer better commission to agents.
The attitude of retail investors is also not inspiring much confidence among fund managers. Since August, investors have been pulling out money from equity schemes. Equity MFs witnessed an outflow of Rs 2,464 crore in December, higher than the net outflow of Rs 814 crore in November and the reported net outflows for five consecutive months.
Besides, huge withdrawals by banks recently have also forced funds to review their business model. Banks have pulled out more than Rs 1,00,000 crore invested in MFs in a single fortnight of December. "The total assets under management (AUM) have dropped below Rs 8 lakh crore, mainly because banks tend to take money out of MFs during December. It is to be seen how much of it would come back since the RBI's observations about banks parking money in MFs," says Y Jawahar, vice president & head, distribution, Mata Securities.
Many industry watchers feel that the money taken out of MFs won't return to the industry entirely, as the RBI wants banks to start lending to companies rather than opting for an easy way out.
Industry players also believe that the talk of scrapping the tax advantage enjoyed by banks and companies in MF investments would dampen the sentiment. As of now, it seems, 'back to small investors' is the only mantra that can help funds rediscover their lost magic.
Source: http://timesofindia.indiatimes.com/biz/india-business/New-strategy-Mutual-funds-turn-focus-on-retail-investors/articleshow/5502795.cms
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