Leave aside regulatory changes, the Indian mutual fund industry today faces a number of issues which are characterized by lack of investor awareness, low penetration levels, high dependence on corporate sector and spiraling cost of operations. Structural changes in business models are what AMCs now require if they want to sustain profitability by Mona Mehta
Further, the dependence on the corporate sector is still pretty pronounced at 51% when compared with economies like US & China where investments channelised through corporates, comprise only around 15% & 30% of the AUM, respectively. This under volatile market conditions, sound a note of caution for the industry, as high dependence on the corporate sector may result in the fund houses being prone to unexpected redemption pressures. Considering the untapped potential, competition too is all set to gain momentum in the Indian MF industry, which is making dominant desire to progress, a reality, through wealth creation.
In fact, the moot point here is amidst the new transparencies that will be introduced in the system meant to boost investors confidence and ensure fair competition in the industry, it is equally important for AMCs to understand how critical is it for them to collectively work towards facilitating more innovation, financial inclusion, cost management, increased investment in technology to support distribution network, with the support from channel partners and regulators alike.
Ramdeo Aggarwal, Co-Founder and Director – Finance, Motilal Oswal Financial Services too feels that in India, creation of the fund is not coming from the strength, in sync with the trend existing in other parts of the world. For instance, in US, founders of fund create fund based on certain insights and convictions for the benefit of customers post which the funds are traded to get the asset, say, may be worth Rs.1 trillion. Hence, Indian asset management companies (AMCs) now need to work on developing new USPs in handling people’s saving.
“The financial inclusion category today has the most competitive and cost efficient structure in place, which we believe is extremely favourable for the final investor. MFs have been extremely transparent with high disclosure standards which help investors in their process of due diligence. With increase in category awareness and enhanced brand connect, AMCs have been able to reach out to the customer more effectively,” Nipun Kaushal, Head – Marketing, ICICI Prudential AMC tells B&E. However, Kaushal refuses to divulge details of the product innovations that he is planning to come up with due to competitive strategies.
Even the regulator now seems to be paying heed to ensure that MF industry sustains its profitability. In fact, Securities and Exchange Board of India (SEBI) has recently issued directions for the mutual fund industry stating that no business houses without five-year financial services experience will be permitted to own stake in an AMC, with an aim to enable only the serious investors to get into the business. “As MF business has a long gestation period, therefore the regulator is now looking for shareholders who can stay for long and are experienced in the industry,” spokesperson of Edelweiss AMC tells B&E.
In fact, the moot point here is amidst the new transparencies that will be introduced in the system meant to boost investors confidence and ensure fair competition in the industry, it is equally important for AMCs to understand how critical is it for them to collectively work towards facilitating more innovation, financial inclusion, cost management, increased investment in technology to support distribution network, with the support from channel partners and regulators alike.
Ramdeo Aggarwal, Co-Founder and Director – Finance, Motilal Oswal Financial Services too feels that in India, creation of the fund is not coming from the strength, in sync with the trend existing in other parts of the world. For instance, in US, founders of fund create fund based on certain insights and convictions for the benefit of customers post which the funds are traded to get the asset, say, may be worth Rs.1 trillion. Hence, Indian asset management companies (AMCs) now need to work on developing new USPs in handling people’s saving.
“The financial inclusion category today has the most competitive and cost efficient structure in place, which we believe is extremely favourable for the final investor. MFs have been extremely transparent with high disclosure standards which help investors in their process of due diligence. With increase in category awareness and enhanced brand connect, AMCs have been able to reach out to the customer more effectively,” Nipun Kaushal, Head – Marketing, ICICI Prudential AMC tells B&E. However, Kaushal refuses to divulge details of the product innovations that he is planning to come up with due to competitive strategies.
Even the regulator now seems to be paying heed to ensure that MF industry sustains its profitability. In fact, Securities and Exchange Board of India (SEBI) has recently issued directions for the mutual fund industry stating that no business houses without five-year financial services experience will be permitted to own stake in an AMC, with an aim to enable only the serious investors to get into the business. “As MF business has a long gestation period, therefore the regulator is now looking for shareholders who can stay for long and are experienced in the industry,” spokesperson of Edelweiss AMC tells B&E.
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri's Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM's Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
