‘MF industry to double its AUM in next 5 years’

Ashish Gupta, chief funding officer of Axis Mutual Fund, mentioned the mutual fund business in India, which at present has belongings below administration (AUM) of ₹46 trillion, is rising quickly and it’ll get the following ₹40 trillion in simply 5 years.

Gupta mentioned the business has been doubling its AUM roughly each 5 years because the yr 2000 and so it’s protected to imagine that the following doubling may even occur within the subsequent 5 years.

“When will the following 40 trillion occur: I feel it’s pretty easy, it’s going to occur within the subsequent 5 years,” said Gupta, while speaking on the topic ‘the next 40 trillion’ at the Mint Annual Mutual Fund Conclave in Mumbai recently.

Apart from the growth in AUM, Gupta said PAN card penetration, which serves as a proxy for the potential mutual fund investors universe, has gone up from 31% to about 51% now. Five years ago, there were less than 20 million investors, whereas that number is now close to 40 million.

Gupta also noted that the number of investors coming from outside the top five metropolitan cities in the country has increased significantly over the last few years. Five years ago, roughly 34% of the AUM was coming from outside the top five metros but now their contribution has increased to 50%. He added that the number of women investors has also doubled to 7.5 million in the past five years.

Gupta said India has come a long way with regard to distribution of mutual fund products. It is amusing to see investment advisors introducing themselves by mentioning their AUM rather than declaring the number of mutual funds they have sold. This is a good marketing practice that will provide more opportunities for advisers, as well as distributors, to partner with clients for a longer period and thus reduce the incentive to mis-sell products.

“The fact that commissions are now trail-based rather than upfront has galvanized the industry shift to the AUM model in terms of selling,” mentioned Gupta, whereas giving credit score to the market regulator for enabling this shift. “Distributors and funding advisors now see their enterprise in perpetuity and never one thing being carried out for an annuity.”

However, Gupta mentioned that buyers want to extend their funding horizon. The common tenure of mutual fund holdings is nearly two years. He mentioned that rising this time-frame will brighten buyers’ possibilities of getting larger returns.

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Updated: 15 Aug 2023, 10:20 PM IST

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