Moneycontrol MF Summit: GenZ participation and communication are essential to growing the mutual fund investor base

 Moneycontrol MF Summit: GenZ participation and communication are essential to growing the mutual fund investor base

Leaders in the industry think that in order to address some of the major perception issues that the mutual fund sector is presently facing, there has to be more emphasis on B30 cities, younger investors, and more investor communication and education.

Inferring that although some millennial investors are turning to mutual funds, Gen Z investors are turning to digital gold or futures and options, As they are already taking risks, Swarup Mohanty, CEO and Director of Mirae Asset Investment Managers Ltd., advised against judging them.

With monthly record inflows into equities mutual funds, the mutual fund sector is flourishing. With increasing inflows via systematic investment plans (SIPs), which indicate greater interest among ordinary investors, it is doing rather well.

But there are just four crore mutual fund investors, which pales in comparison to, instance, the number of fixed deposit (FD) account holders (according to statistics from the Reserve Bank of India (RBI), the FD account base stands at 24 crore), or the approximate 33 crore individual life insurance policies. The business confronts problems related to perception, and at the Moneycontrol Mutual Fund Summit, a panel of prominent mutual fund CEOs gathered to discuss the crucial concerns.

According to Kayezad E. Adajania, Editor, Personal Finance, Moneycontrol.com, "one prevalent opinion is that many investors who have entered the markets after COVID-19 appear to assume that it is preferable to go to equities rather than mutual funds to acquire wealth. He asked the panelists, including Neil Parikh, Chairman and CEO of PPFAS Mutual Fund, Ganesh Mohan, CEO of Bajaj Finserv Asset Management Ltd., Swarup Mohanty, CEO and Director of Mirae Asset Investment Managers Ltd., Radhika Gupta, MD and CEO of Edelweiss Mutual Fund, and Kailash Kulkarni, CEO of HSBC Mutual Fund, to discuss their strategies for changing this perception.

"I'll play devil's advocate here and suggest that if we want to combat this notion, we need to alter. We are quite judgmental; for example, creating demat accounts is incorrect, doing business directly is terrible, losing money in futures and options (F&O) is bad, and gambling is awful. The main concern is whether or not the money will come to us since these are financial assets and it will go wherever it goes, according to Mohanty.

He noted that over 65% of Indian investors have their money stashed in cash and bank accounts, according to statistics from the RBI. "Right now, we are offering them little caps. We will only get that much. We initially adopted an aggressive stance when we declared, "Mutual funds sahi hai," which required us to stick out our necks. If we go out and ask for debt-related investments, they will come to us. Internal perspective needs to adjust, he added.

He made a reference to the idea that although some millennial investors are turning to mutual funds, Gen Z investors are turning to digital gold or futures and options, and he stated it is preferable not to criticize risks because they are already being taken by them. "Our role is to discuss risk and defer to others in doing so. There is a perception problem there. Instead of fighting change, we need to embrace it and even go ahead of it, he added.

The debate then turned to the mad dash for AUMs. "I don't believe everyone in the business hunts after AUM. If we were in the food industry, I could create a number of restaurants serving different types of food. Others do not launch as many NFOs as Edelweiss AMC does. Some of us decide to do it, while others do not. The advisory community must explain what makes sense and what doesn't if a new AMC decides to launch five NFOs, according to Gupta.

She believed that there are more than enough things available on the market. "We would be doing a favor to ourselves if we didn't conduct a single NFO or create a new category. Then, we would concentrate on improving their packaging. We have a surplus of items, such as debt instruments with maturities between 2023 and 2037. We provide every sectoral fund imaginable. Now, let's concentrate on how individuals utilize these services and solutions. We have 40 crore users of OTT and 40 crore consumers of food delivery. You can start a SIP if you can start an OTT subscription, the speaker said.

Adajania brought out situations that caused people to lose faith in the mutual fund sector. Is there a need for AMFI to do more to rebuild confidence given how SEBI views AMFI and its reluctance to become a full-fledged SRO (self-regulatory organization)?

Neil Parikh believed that even individual mutual funds needed to do more to increase the confidence of retail investors in mutual funds. "A fundhouse had approached us to offer goods before we formed our mutual fund and were operating a PMS. More than 100 schemes, all of which are identical. Why this and what that? had no satisfactory explanation. Only that we would get bigger commissions was mentioned to us, he said.

SEBI, the market regulator, has now rationalized commissions. He thinks that during the last several years, the sector has successfully addressed many issues. Ten years ago, mutual fund communication was nonexistent, but it has since improved. There are guidelines for categorization now, and you may introduce several schemes (in the same category). Even commissions have now undergone rationalization. In these ten years, we've fixed a lot of these issues, said Parikh.

Adajania said that the majority of mutual fund communications are in English, which may not be effective in B30 towns. He then inquired, "Are mutual funds elitist or exotic?"

"The size of the issue is very enormous. 20–25 percent of mutual fund AUMs come from B30 cities and towns, but 65–70 percent of FD volumes. India's wealth is not concentrated primarily in its cities; rather, it is evenly spread. B30 markets also provide a significant possibility, according to Mohan.

He denied, however, that mutual funds were goods for the wealthy. "This is mostly being driven by retail. There is still a lot to be done. How, for instance, can you overcome geographical limitations to extend your own product range using technology? For instance, just 10% of Indians get English news since 90% of the population of Bharat speaks their native tongue. Your material must be localized for several languages. De-cluttering jargon and technical phrases would be difficult, so it is easier said than done, he added.

Adajania said that the industry is not pushing much conversation on debt mutual funds, preferring to concentrate on equities instead. "I don't quite agree with the claim that the sector isn't doing enough to address debt. It's feasible that in nine to ten months the situation will be much better. People will proclaim it to be an excellent investment opportunity once the rates are reduced. In 2016–17, we saw this, said Kulkarni.

He said that workers' portfolios already have a sizeable debt allocation since they contribute to provident funds, which are an allocation towards debt. "Our portfolios are more heavily weighted toward debt than toward equities. People often lose out on it. Thus, the debt discussion," Kulkarni remarked.