Towards 2015: Sustaining Inclusive Growth - Evolving Business Models

The Indian Mutual fund industry has witnessed unprecedented growth riding on the back of a high savings and investment rate, favorable demographics and increased levels of retail participation over the past few years. There has been a significant expansion in the Assets under management, which has grown from Rs 231,862 crores in March 31, 2006 to Rs 613, 979 crores in March 31, 2010, reflecting a compounded growth of 27.6%. This bears testimony to the fact that the Indian mutual fund industry is robust enough to sustain a noteworthy growth rate, even amidst the ongoing financial crisis. Compared to the other Asian economies, India is a considerably mature market, and thereby serves as an attractive investment proposition.

The year gone by has been an interesting and challenging one with the markets in momentum and a number of regulatory changes. Fund houses no longer charging an upfront load, reduction in the commissions of distributors, have been some of the reasons which have urged the industry to revisit its business model. It remains to be seen how distributors, customers and the industry adapt themselves to this evolving framework. The pace of growth is being matched by the changing regulatory framework, which requires the industry to adhere to compliance norms. The regulator also aims to bring about a greater degree of transparency in the system, by improved governance structures.

Challenges that the industry is dealing with have been persistent for some time now, the most prominent among them being lack of investor awareness and low levels of penetration, the latter being a fall out of the former. Heavy dependence on corporate customers, inspite of the humongous prospects in the retail sector, along with spiraling costs and low penetration levels are some of the other burdens that the mutual fund industry is saddled with.

The roadmap towards achieving the vision for 2015, remains to be defined by the industry stakeholders ie the fund managers, the distributors, the regulators, the service providers, and most importantly investors. Hence, the theme “Towards 2015- Sustaining Inclusive Growth - evolving Business Models “ 

This report dwells on all the above aspects, and also throws light on the key business and regulatory developments not only in India, but global economies like US, UK, Australia and China. The report concludes, highlighting the key imperatives which are required to take the industry to the next level of growth. The report was launched at the CII’s National Mutual Fund Summit 2010 held in Mumbai on June 23.

 

CII - PwC Mutual Fund Summit 2010