Confident of expanding AUM to Rs 100 trillion over next decade: NS Venkatesh, AMFI
We definitely need to widen our investor base and that is the prime thing.
For the first time the Association of Mutual Funds of India (AMFI) has released a vision document. What is the rationale of this report.
I would say that this is one of the first instance where we have looked at how do we take the industry to the next level because we have reached a landmark of Rs 25 trillion. To that extent, we felt we need to look at it and see what is the huge potential which is outside there and ensure that, we put out our vision for the next 10 years where we are now trying to say that on the 25 trillion AUM that we have as of today, we will take it to at least Rs 100 trillion over the next decade. So, that is the sort.
What are all the things on which this $100 trillion depends? The PM himself has said that our economy is going to grow from a $2 trillion to a $5 trillion one in the next four years. We are looking at it from that angle. We believe that the mutual fund will have a role to play in ensuring that we channelise the financial savings of the economy and play a major catalysing role to help the development of the economy for reaching the $5-trillion mark.
Towards that, we definitely need to widen our investor base and that is the prime thing. Currently, we have over two crores unique folios. We will try to expand it into 10-crore unique portfolios. Towards that end, we need to work hard to increase the distribution channels. Currently we have a distribution channel of the IFAs. There are around one lakh IFAs there. We are trying to see if can we make them into five lakh IFAs.
If we bring that together with the digital channels where we will partner, it will ensure that the reach is beyond the B30 to B100 cities and that we go from India to Bharat, to take the savings from them and bring it into the mutual fund channel.
Right now reports are also talking about an AUM of Rs 100 lakh crores and 10 crore investors over the next 10 years. Is this possible given the current market condition?
Even in 2008-09, there was a dip. All those things that have happened are synchronised with the way the market keeps moving up and down. In a mutual fund, you start investing with a SIP which is actually showing great signs of improvement. Over the last 36 months, the data that we have been publishing shows that there is always an upward trend and a not a dip at all. This shows that the market has matured, the retail investors have matured and we believe that going ahead they will continue to exhibit that maturity.
Investments in mutual funds are for longer term and for their own goals. We believe that it is possible. With continued hand-holding at the distributors’ level and at AMCs’ level plus the investor awareness campaigns that we are running for mutual fund investors, that market appears volatile but it is better to remain invested rather than going in and out and trying to time the market.
People have learnt that message very well and the message is loud and clear there. So I think that we will continue to see increase in number of folios. We will continue to see increase in the amount of investment. If you look at five years back, the average investment was somewhere around Rs 50,000 the ticket size. Now if you look at the ticket size, ticket size is somewhere around Rs 2 lakh.
The ticket size is as well as the number of folios are increasing. We are quite confident that whatever numbers we have put out to you is achievable. During 2013 to 2019, the mutual fund industry has grown by a compounded annual growth rate of somewhere around 26%, a growth rate which is outpacing the rest of the world.
In 2018, the asset management industry for the rest of the world was showing a negative growth of 4% and India was showing positive growth of 7%. So we are outpacing the rest of the world even. We need to look at all these factors in conjunction and then take a call whether this Rs 100 trillion is achievable or not.
At AMFI we are quite confident that Rs 100 trillion AUM is achievable. From 1963 it took 50 years for AUM to come to Rs 10 lakh crore.
How would target to grow the investor base to 10 crores over the next two years?
There has not been any trust deficit at all. If there is a trust deficit the number of folios that are getting opened should have actually dropped. The number of folios opened is actually getting increased. That shows that newer investors are coming and investing in mutual funds.
While newer people are coming, the existing people are still remaining with us. I do not think there is any trust deficit. At this particular juncture, where volatility is there in both equity and debt markets, some investors may take a bit of time to review and assess their situations.
If you look at the investments in SIP, it was around Rs 8,364 crore last month. That means in the last four months we have garnered around Rs 32,000 crore. Year before last, we garnered around Rs 96,000 crore. So, one can see money has been flowing in into the mutual fund industry through the SIP route.
There is volatility in some schemes but that is not going to affect the overall trust. People trust it because this is a low-cost investment product and this is a product which has shown in the past also that essentially that they can generate wealth at a very low cost sort of investments. We will see people continuing to remain invested and new people coming and investing into the mutual funds.