Awareness on the go
It was September, too soon for all the marathon training to start and still very hot. Where are all these runners coming from, said the silent look and raised eyebrows of my running companion (he would prefer ‘soulmate’—but let’s not get personal) and I exchanged. Jogging on Pedder Road in Mumbai, I am quite certain that same time a year ago, it wasn’t as crowded with Sunday morning runners. Our raised eyebrows preceded incredulous shaking of the heads (the no-idea-what’s-happening kind), as we dodged a large group (literally with 10-12 people together) of onward runners.
It’s an interesting development.
Why are there more runners now? Given their 30-plus age group (if not 50-plus), India’s expanding population can’t be the reason.
It could be a desire to lose weight, if it weren’t for the fact that most runners aren’t really obese. That leaves us with increased awareness of the positive impact of running. There is a lot of commentary around running these days. There are articles on senior executives in large companies who have embraced the sport as a leisure activity.
There are articles not only highlighting health benefits but also the need to prep well for a run. And large billboard advertisements are comparing running to investing.
Running is literally everywhere: 10 km runs; and half and full marathons are organised in so many towns and cities across India.
From running to investing
I can ramble on more about running, but here is why this is relevant for the personal finance section of a business daily. The lesson in awareness also partially explains what’s happening with equity mutual funds. In 2016, despite a sober equity market, inflows into equity funds—lump sums and more importantly systematic investment plans (SIPs)—have shown a continuous improvement.
Till now there was a distinct trend of lumpy increase closer to market peaks, and a lull in other periods. But not anymore. One-year return for benchmark indices at around 7.5% is prima facie comparable to fixed deposit returns—yet inflows into equity and balanced funds increased 26% at the end of October 2016, as compared to a year ago. If you strip out arbitrage funds (for those who are quick to point out), in October itself the equity funds saw inflows of around Rs5,300 crore.
At least 3 million new folios have been added in equity funds over last 1 year. The monthly SIP book has improved to Rs3,500 crore from around Rs2,500 crore in January 2016.
What’s bringing more money into mutual funds?
Among other things—awareness. Due credit needs to be given to the regulator—who in 2012 mandated additional expense of 2 basis points (bps) for investor awareness programmes (IAP)—and asset management companies (AMC) for undertaking various formats of investor education since then. One basis point is one-hundredth of a percentage point.
In financial year (FY) 2015-16, the total number of participants in IAPs was recorded at 473,000 as opposed to 248,000 in FY13.
There are innovative games, videos, advertisements and many on ground programmes (a lot of innovation comes from mid- and small-sized AMCs). Additionally, AMCs are working directly with advisers and distributors and arming them with material that explains the concepts around mutual funds rather than merely giving them product-specific materials.
A senior executive with an AMC, which is in the forefront of investor education, joked about the impact of her company’s awareness programme. She said that distributors were using her company’s material but ultimately selling another’s fund. Advisers I have interacted with, always speak highly of the said AMC’s investor education programmes. Digital initiatives like YouTube videos, mutual fund websites with simple literature on investments and on-the-ground investor awareness programmes in B15 cities (60% IAPs are in these cities), all initiatives together seem to be making an impact.
Schedule of planned investor awareness programmes across various town is available on the Association of Mutual Funds in India’s website.
The principles of long-term investing don’t change. What’s changing is that the commentary is coming directly from the product manufacturers.
On that crowded Sunday morning in September, we had the good fortune of meeting and talking to (yes, while running) Pervin Batliwala, a multiple times podium finisher for marathons.
She confessed that social conversations more often than not are around various nuances of running as a sport. Pervin is now a professional runner and has even completed the daunting 72 km Khardungla Challenge (in Ladakh). But she wasn’t always so experienced. She recalled her first Standard Chartered Mumbai Marathon, where she hit a ‘wall’ midway and could barely move forward. That was a learning experience for her.
Running alongside my companion for the next kilometre or so (admittedly by then I fell behind, in my defence—it was 2 hours of non-stop running) she was happy to share the knowledge she has accumulated since.
This article isn’t meant to highlight the merits of long-term equity investing and wealth creation. Rather it’s a nudge for those who have already experienced it to share generously.
AMCs have started, but numbers are still minuscule—40 million equity-oriented folios in a population of a billion-plus.
A lot more needs to be done to make investors aware if the pace of mutual fund penetration is to pick up. It is the duty of all experienced investors, advisers and AMCs to share their investment experiences (rather than artful product sales) with the beginners.
Slowly but surely, as awareness extends and conviction builds; streets will get more new runners. Thankfully the experienced are happy to run alongside, sharing their knowledge so the newcomers can run stronger and with fewer injuries.