Mutual Fund Performance

Shubham Jain
9810060
Coverage
• Assets Under Management Growth(AUM)
• Indian Mutual Fund Industry
• Market Share of Major Players
• Distribution Channels
• Segmentation
• Challenges and Issues
• Drivers for Growth
 AUM Growth
• The Assets under Management (AUM) have
grown at a rapid pace over the past few
years, at a CAGR of 35 percent for the five-
year period from 31 March 2005 to 31
March 2009.
• Over the 10-year period from 1999 to 2009
encompassing varied economic cycles, the
Industry grew at 22 percent CAGR.
 AUM Growth
• This growth was despite two falls in the
AUM-the first being after the year 2001 due
to the dotcom bubble burst, and the second
in 2008 consequent to the global economic
crisis.
 Growth in AUM in the Indian
Mutual Fund Industry

(Average AUM in INR Billion)

Source: AMFI Data 2009

 AUM Growth Rate in Select
Countries

(CAGR for 2004-

2008)

Source: AMFI Data 2009

 AUM to GDP Ratio for India

Source: AMFI Data 2009

 Indian Mutual Fund
Industry
• The Indian mutual fund industry
currently consists of 38 players that
have been given regulatory approval
by SEBI.
• The industry has witnessed a drastic
shift in favour of private sector
players , as the number of public
sector players reduced from 11 in
2001 to 5 in 2009.
 Market Share of Major
Players

Source: AMFI Data 2009

 Indian Mutual Fund
Industry
• The Indian mutual fund industry has
significantly high ownership from the
institutional investors.
• Retail investors comprising 96.86 percent in
number terms held approximately 37
percent of the total industry AUM,
significantly lower than the retail
participation in the US at 82 percent of AUM
Indian Mutual Fund Industry
– Industry Investor Mix
 No of AMCs Growth in no. of AMCs

Year

Source: AMFI Data 2009

 Segmentation of
Mutual Fund Houses
• The mutual fund houses are segmented
on the basis of product portfolio and
distribution strategy, the key elements
of competitive strategy. The three
categories are:
 The market leaders having presence across
all product segments.
 Players having dominant focus on a single
product segment-debt or equity.
 Players having niche focus on an emerging
product category or distribution channels.
 Products
• The Indian mutual fund industry is in a
relatively nascent stage in terms of its
product offerings, and tends to compete
with products offered by the Government
providing fixed guaranteed returns.
• As of December 2008, the total number of
mutual fund schemes was 1,002 in
comparison to 10,349 funds in the US.
Growth Rate (Five year
CAGR) across Fund
Categories
 Distribution Channels
• As of March 2009, the mutual fund industry
had 92,499 registered distributors as
compared to approximately 2.5 million
insurance agents.
• The Independent Financial Advisors (IFAs) or
Individual distributors, corporate employees
and corporate comprised 73,21 and 6 percent
respectively of the total distributor base.
“Mutual funds are still sold,
not bought.”
 Challenges and Issues
• Low Levels of Customer Awareness
• Limited Focus on Increasing Retail
Penetration
• Limited Focus Beyond the Top 20 Cities
• Limited Innovation in Product Offerings
 Challenges and Issues
• Limited Flexibility in Fees and Pricing
Structures
• Limited Customer Engagement
• Limited Focus of the Public Sector
Network on Distribution of Mutual Funds
Voice of the Customer
 Impediments to Mutual Fund
Investing
• Availability of a large number of mutual funds
schemes makes investment decision
complex and difficult.
• Banks and IFAs remain the preferred channel
given that investors trust them for their
advice and after sales service.
• Complicated KYC norms restrict potential
investors.
 Drivers for Investment in
Mutual Funds
• Investment in Mutual Funds is attractive to
customers owing to tax benefits
• Consistency in fund performance and
brand equity influence customers to make
relevant selection of mutual fund schemes.
• Simplification of Processes to Increase the
Quantum of Investments
Future Outlook in a Dynamic
Environment
 Customer (Retail Segment)
Key Growth Drivers Expected Impact
Rising disposable incomes andIncrease in disposable incomes
savings and household financial savings
may result in households
seeking alternate avenues for
investments to yield higher
returns with reasonable risk

Innovations in distribution Distribution innovations are

expected to increased mutual
fund penetration specifically in
Tier 2 and Tier 3 towns.
Thereby expanding the mutual
fund customer base.
 Customer (Retail Segment)
Key Growth Drivers
Favourable demographics such
as increasing proportion of
working population (20-59
years) and increasing
Urbanisation resulting in
increased levels of financial
Saviness
Expected Impact
Favourable demographics like
urbanisation and a relatively
young population having an
increased risk appetite, are
likely to save more and seek to
invest a higher proportion
of those savings in market-
linked instruments such as
Mutual funds
 Customer (Institutional
Segment)
Key Growth Drivers
• Rising corporate earnings
• Maturing capital markets
• Interest rate cycle
• Call money market rates
• Corporate debt and
Commercial papers
Expected Impact
Increased demand for
sophisticated treasury
management products
A better economic situation in
the country is likely to Ensure a
steady fall in the interest rates.
Thank You