What would you call the three big learnings of your 20-year career in financial services?
A, If you want to be an effective leader, you need to be inclusive, open to 360-degree learning, and maintain transparent communication with your team. Your team defines your success as a leader. Of them, be a change management person. Always seek to improve and change the way things are. The results will be incredible. Three, never stop learning. Find a new job / role, try a new task that you are wary of and always be participatory.
What is the main objective of MF Utilities India (MFUI)?
For MFUI, jointly formed by all AMCs under the umbrella of the Association of Mutual Funds in India (AMFI), the main objective is to act as a central aggregation system for the mutual fund industry. , resulting in lower costs for AMCs, creating efficiency for Mutual Fund Distributors (MFDs), Registered Investment Advisors (RIAs) and Registrar and Transfer Agents (RTAs), passing the benefits on to investors, and ensure a level playing field in industry.
What are the inherent risks you see in today’s mutual fund market and how do you trade them? How do you propose to improve processes in the industry?
From the investor’s point of view, the DIY mode is developing, but the risk of losing investors’ wealth is obvious and possible. The majority of DIY investors do not have the proper grip, critical data analysis, and a comprehensive risk profile. This results in faster reimbursement and has an impact on both AMCs and MFD / RIAs. From a distribution / consulting point of view, the risk is that only 35% of the MFDs are active and that 14% of these MFDs manage more than Rs 25 crore.
The total registration of new MFDs has also dried up. Developing the skills of MFDs / RIAs is very important to ensure that they provide good advice to investors. Product side, debt funds do not receive sufficient inflows and investors fear investing in debt. Ideally, debt funds are preferable for having a balanced portfolio. It is good to see that the inflows are high in equity programs, but investors should understand that there is high risk in stocks and diversification, balancing a portfolio is the key to creating the wealth.
What is the level of mutual fund penetration in India? What is the opportunity there and how can it be achieved? What are the challenges?
The mutual fund industry has 2.71 crore of unique investors, with around 9.8 crore of folios, which means there are 3-4 folios per investor. Over the past four years this investor base has doubled, but according to the computer database we have 51 crore PAN issued (as of June 30, 2021).
This means that we only have one MF investor for 21 PAN. The possibilities for penetration are wider, as the industry has performed very well over the past 3-4 years.
Regardless of the pandemic, the MF industry added 12 lakh of new investors in the first quarter of 22 compared to 20 lakh in the 20-21 fiscal year; the number of SIP accounts crossed 4 crore and a record 21 lakh new SIP was recorded in June 2021. SIP assets under management are at an all-time high and now represent almost 15% of the industry’s total assets under management, which is a significant milestone.
When it comes to the opportunities available, there is the gap to be bridged – compared to 150 trillion in bank deposits, there are only 100 million MF investor accounts.
There is also a great opportunity to expand the investor footprint in SEBI designated B30 locations i.e. locations beyond the top 30 geographies. People need to be educated about savings through FPs from high school or college, and within every household. The results of an investment over a long period should be emphasized.
The challenges are: how to channel household savings into mutual funds, financial illiteracy / low level of awareness, fund performance issues and the ease and standardization of some operational processes.
There is a glut of IPOs on the market today. What opportunity does this present for mutual funds?
Even in the US markets, there is a glut of IPOs. In India, in a bull market scenario, many IPOs and investors get carried away and have less time or data points to analyze. Investors should understand that investing in IPOs is a risky strategy of calculation. Typically, bull markets are inundated with IPOs, and not all companies are worthy of investment.
I’m pretty defensive about the opportunity these IPOs provide for mutual funds, but it’s worth noting that many AMCs invested in the recent IPO of Zomato, which is a loss-making entity. But to sum up, in India, even though there is a glut of IPOs, these are the key monitoring factors:
· Prices have become more aggressive.
· Post-registration performance has been lukewarm.
There are evaluation issues and
· There are many key national risk factors.