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Taking mutual funds beyond metros

Taking mutual funds beyond metros

To improve the share of MF products, we need to increase their popularity beyond the metros. How can we do this?

Jaideep Bhattacharya

The popularity of mutual funds is growing across the country. Investors have shown a keen interest in them as a preferred wealth creation tool. The mutual fund industry has also registered tremendous growth in recent times. Increasing awareness among people about the benefits of investing in financial assets through the mutual fund route has contributed to this growth.

If one were to look at the share of gross domestic savings that goes into MF products, it has increased from 4.8% in 2007-8 to 7.1% in 2008-9. This is a healthy rise, but the share is still less when compared with the 50% share claimed by banking and insurance. It is low in terms of value as well as the number of account holders. Therein lies the challenge and the opportunity. At present, 80% of MF business comes from the top eight cities. Institutional investors contribute substantially to the assets under management. Obviously, to improve the share of MF products, we need to increase their popularity beyond the metros. How can we do this?

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Education: It is crucial to educate people about investment planning, risk and returns, as well as the need to diversify across traditional and non-traditional asset classes.

Improved network: Investors need to have a physical point of contact while buying MF products. For instance, UTI has a trained army of more than 36,000 independent financial advisers across the country, who provide the last-mile connectivity to its investors. These advisers are professionally certified by AMFI and can provide guidance to investors.

Innovative products: Apart from creating awareness, fund houses must attract investors with their offerings. For instance, UTI started the Micro Pension initiative in 2006 in a bid to reach out to the unorganised workforce. Under this scheme, an investor can put in as little as Rs 200 a month. MFs are also promoting systematic investment plans or SIPs in a big way; these plans encourage regular investments and inculcate a disciplined approach to investing. This is also a smart way of negating the effects of investing in volatile market conditions.

Simple products: As fund houses tap newer and under-developed markets, they are constantly striving to simplify products and demystify the myths around MFs. UTI is also seeking to promote new channels through tie-ups with partners who have a pan-India presence, like the India Post. Customisation is the key.

Substantial resources are also being devoted to upgrade the skills of employees responsible for creating awareness about MFs among investors. Massive campaigns are being conducted to help more agents become professionally accredited with AMFI. Most importantly, trust, brand, distribution and innovation will be the key drivers for MF growth in the coming year.

Jaideep Bhattacharya is Chief Marketing Officer, UTI AMC.

Published on: Jun 12, 2009, 5:17 PM IST
Posted by: AtMigration, Jun 12, 2009, 5:17 PM IST