After 13 years of privatization mutual fund companies - which number around 32 - may take pride in managing assets of more than Rs4 trillion, but how many investors do they have?
The Invest India Incomes and Savings Survey 2007, released by IIMS Dataworks, shows that out of 321 million individual wage earners aged between 18 and 59, only 5.3 million invest in mutual funds in India. So, fund investors constitute a mere 1.6% of the population considered for the survey.
The survey also reveals that 90% of the savers have no clue about what a mutual fund is, or how they can access the market through the systematic investment plan (SIP).
Over the past few years, mutual funds have aggressively promoted the SIP to get investors with a monthly saving of Rs500-1,000 in the fold. Large fund houses such as Reliance Capital Mutual Fund and Prudential ICICI Mutual Fund have started a micro SIP initiative through which investors can start investing with a minimum monthly investment of Rs50 or Rs100. But that doesn’t seem to have yielded the desired effect till now.
The survey points out that a little more than 300,000 small investors, of the 20 million who manage to save at these levels in other products, have taken up the SIP option—that is bound to become complicated because the industry is now struggling to comply with the new Securities and Exchange Board of India norms that require every mutual fund investor to quote a Permanent Account Number (PAN).
While the industry may be actively creating awareness about mutual funds as an asset class, 40% of the population still think that they can’t afford to play in this asset class because it is beyond their financial capacity. An additional 28% think it is a risky asset class. Complicated application forms, too many products, and a lack of awareness about where to buy from are some of the reasons that have held potential investors back.
The findings can indeed help the industry introspect. Association of Mutual Funds in India chief A.P. Kurien says trade is still struggling to change the risk-averse mindset of Indian investors. “Every fund house is making efforts to reach out to the common man by creating awareness,” Kurien says. “We know that we have a long way to go, but we are slowly heading there.”
There is no denying the fact that the mutual fund companies have a lot of ground to cover, says Nilesh Shah, chief investment officer and deputy managing director of ICICI Prudential Asset Management Co. Ltd. “Our track record in attracting retail investors is just like the case of considering a glass as half-full or half-empty,” Shah says. “If you are optimistic, you can say that we have done a good job so far. From a pessimistic view, you can say that there is so much potential and we have delivered too little,” he adds.
Another chief executive officer of a large mutual fund agency argues that unlike banks or insurance companies, mutual funds have always got a step-motherly treatment in terms of regulation or taxation. “If I am accepting investments only through cheques, then why should I ask investors to get a PAN?” he asks.