Mutual funds simplified data

Some more data from the same report mentioned earlier! Aum as a percentage of the GDP in India is still at 8% compared to 79% in USA and 39% in Brazil.

Will India go the American or the Brazilian way? It is difficult to say, but from the looks of it, India will go that way. Not that the mutual fund industry has done so well, but the distributors have sold well. Hence most of the growth in Indian MFs is from NFOs and the remaining from increase in NAV.

What will it take for an AMC to win…or create a name for itself?

1. Distribution strength: Sorry, if you were looking for “performance” as the 1st point. No performance as conveyed by the distributor can be very different from the actual performance. For e.g. we recently did some screens of performance and found that if entry loads are considered, except for a few infrastructure funds and a couple of large cap funds, most funds which have benchmarked against the nifty have underperformed the index.

2. Banks ability to convert the Fixed Deposits into SIPs. If the banks convert the FDs into one time investments, the client may not like the fall in nav (but the amc might push the distributor to do one-time so that there is no mind share intrusion!). Too much of moneys belonging to the middle class Indian is still sitting in Post offices, bank Time deposits and the like – this change is necessary for the mf industry to grow.

3. Branding: The amount of money that an amc spends on communicating with the distributor and the end user is likely to determine the stickiness. Branding in case of a financial product comes in a variety of ways – the way they advertise, the way the distributor communicates, fund performance communication, interaction with the regulator, stickiness of sales personnel and fund managers, …are all factors which will decide on the image. Perhaps the toughest bit to handle.

4. Niche: Funds which can perhaps get into certain niches and service that niche will do better than the others. Again tough.

5. Performance – as the end customer understands it….

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