Retail investors have yet to warm up to MF

New Delhi, June 24: The Indian Mutual Funds (MF) industry has low penetration among retail investors notwithstanding good growth, a study says.

Assets under management in the MF industry rose to Rs 4.14 trillion on May 31, up nearly 50 per cent as compared to the same month in 2006, a Confederation of Indian Industry (CII) PricewaterhouseCoopers study on Indian mutual funds said.

But inspite of good growth, the industry has low penetration among retail investors unlike in the United States and United Kingdom where mutual fund route is used by people for planning retirement, children's education and even to acquire assets, the study said.

The study called on the MF industry to widen the range of products to sustain growth instead of tapping the same urban retail investor's wallet, stating that it should also focus on the semi-urban and rural markets.

Stating that there are plenty of opportunities as also challenges before the industry, the study observed that, '' Product differentiation and quality standards would be key enablers which could make a difference between boom and gloom for fund houses.''

The study, commissioned by the CII suggested the MF Industry to leverage development and high growth in commodity markets for its own growth. '' Commodity markets, which are quite popular in mature markets, may just be able to make a debut in India'', the study noted.

It further suggested enabling small investors to participate in the real estate boom through real estate mutual funds. However, at the same time, it cautioned that a real estate fund would be faced with its own set of challenges and SEBI would prefer that all relevant regulations are in place to protect the interests of small investors.

Another major opportunity for Indian MFs would be to go global as Indian investors are now allowed to invest upto USD 100,000 abroad. But this requires convincing them about the opportunities available in the more mature global markets.

Stating that the time is right to make a beginning, the study has called for a strong regulatory framework, clear guidelines and the talent to back it up. This way, the industry can cater to the new breed of investors who are keen to diversify their risks.

The study has identified the diminishing talent pool of fund managers, pressure on margins, pressure of consolidation, innovation and product differentiation as some of the major challenges being faced by the MF industry. Fund trustees also need to ensure that their funds are managed and operated to the full benefit of the unit holders.

UNI