Less than 24 investors stayed in our fund for 24 years: DSP MF’s Kalpen Parekh
1 min read.Updated: 15 Jan 2021, 10:40 AM ISTNeil Borate
DSP Equity Fund has delivered a return of 19.47% compound annual growth rate as of 14 Jan since its launch in 1997
Only 49% of investors have stayed in equity MFs for more than two years, indicating a problem of short-termism that affects the actual returns of investors, shows Amfi data
MUMBAI: Kalpen Parekh, president, DSP Investment Managers Pvt. Ltd tweet yesterday that less than 24 investors remained invested with DSP Equity Fund since its launch 24 years ago. According to data from Value Research, over this time frame, the fund delivered a return of 19.47% compound annual growth rate, or CAGR, (as of 14 Jan 2021) since it was launched.
The fund was launched in April 1997 and has a size of ₹4,613 crore (as of 31 December). It is a multicap scheme but is slated to move into the flexi cap category. This will give it the ability to invest in large, mid and small cap companies without restrictions on allocation to each category.
To be sure, the size of the mutual fund industry was small in its initial years and the number of investors was small.
According to the Association of Mutual Funds in India (Amfi), the total size of the mutual fund (MF) industry in July 1999, the earliest month for which data is available on its website, was ₹79,501 crore. The size has grown to about ₹31 lakh crore in December 2020, a 39 times jump. A large number of investors entered in 2017 when demonetisation reduced interest rates on fixed deposits, pushing individuals to invest in mutual funds. Such investors are not likely to have a very large holding period in mutual funds. However, Amfi data as of September 2020 also shows that only 49% of investors have stayed in equity mutual funds for more than two years, highlighting a problem of short-termism that affects the actual returns that investors get.
"Clients have long term investment horizon in mind, like 10-20 years, while starting with equity investments. But doubts begin creeping in within months if the market comes down. Roughly, good distributors and financial advisors will double the average client's holding period in equity from 2 to 4 years. Asset allocation is important in this. If the investor gets this right at the start, he or she will be able to hold on for a long period of time," said Amol Joshi, a Mumbai based mutual fund distributor.