Mutual funds – simplified report from an international player

I recently read a small (about 80 pages) report on the Indian mutual fund industry. Most of the facts were well known, but still some were surprising.

Here is a small summary of what I found interesting (the whole report is):

This was a market survey of 750 investors, 850 Independent Financial Advisors, and 40 0rganisations – asset management companies, Registrars, distributors and corporates.

The Amc industry has grown at a scorching pace of 47% y-o-y from 2003 to 2007, but most of the growth has come from NFO collection and appreciation – the older schemes which are now cheaper not collecting any monies!

The Indian amc business is most profitable at 32 bps compared to 12 in UK and 18 in US. This is quite stunning because the costing structures in the UK and US is higher. So in case you are wondering whether the foreign firms will stay in India or run away, the answer is clear- they may leave their parent country but Indian profitability is mouthwatering.

Penetration in non-urban India is almost non-existent. Most of the action is in the TOP 8 cities. So if you are a distributor in the top 30 cities go and push, the world there is waiting!

The IFA is highly unorganised (heard of I presume). And in a survey IFAs have said the following:

69% of them want better training

57% of them want better branding / advertising

there is actually no feed back on saying they want higher commission! But when you read the whole report and realize that most of the monies are coming from NFOs, you realize that the distributor knows how to get a greater commission!

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4 Responses to “Mutual funds – simplified report from an international player”

  1. Excellent Insights!

    How can one get access to the full reprot?


  2. ask Mckinsey

  3. when ifas say they want better training do they mean knowledge training or do they mean they want Junkets in the name of training. A good lecture from a good practising lawyer or a CA or any other professional has to be attended with full concentration. Normally I see IFAs loiter here and there or sleep thru short sessions too! Will they actually sit through a full 2 day training? I doubt it.

  4. When you are saying that the profitability of Indian mutual fund is the best, does the profitability not improve with the abolishing of the entry load? Because not only do they not pay upfront commission (which was anyway being borne by the client) but they save the trail commission (which was coming from the amc’s fees). So by a stroke of the pen AMFI has improved the profitability of the amcs! Long live amfi.

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