MF industry has growth potential but talent a concern: CEOs at BFSI Summit

The mutual fund industry grows on ‘word of mouth’ and with the industry now having a 25-year long history on wealth generation, it’s only a matter of time when mutual funds tread deep into Bharat from India, said top MF honchos at the Business Standard BFSI Summit on Thursday.

“Today, 27 per cent of the equity AUM is from outside of the top 30 cities. More than 45 per cent of the MF portfolios are also from these smaller towns and villages. We still have a long way to go but with technology on our side, this is very much possible,” said Navneet Munot, CEO of HDFC MF.

Radhika Gupta, CEO of Edelweiss MF, cited the success of ‘mutual fund sahi hai’ campaign to point towards the rising awareness on MFs. “We have become a part of pop culture. I have come across this slogan on various shows on television. A lot of investors have come in post covid and we need to ensure that they stay. First experience is the defining experience,” she said.

MF executives believe that the debt offering of mutual funds have a lot of scope but somewhere the industry has not done enough to popularise their fixed income products.

“Indians prefer non-volatile assets and MF debt offerings are superior to any other fixed income instrument out there. There’s a need that we educate people about the potential of debt MFs,” said Nimesh Shah, CEO of ICICI Prudential MF.

“On the lines of MF sahi hai, we need to have ‘fixed income bhi sahi hai’. Equity is good for wealth generation but there is also a need for regular income generation and debt funds have potential there,” said A Balasubramanian, CEO of Aditya Birla Sun Life Mutual Fund.

DP Singh, Deputy Managing Director and Chief Business Officer at SBI MF, said there’s a need to highlight the tax efficiency angle of debt MFs. “Debt MFs are not just about returns. It’s also about tax efficiency. As an industry, we have not properly pitched out debt funds to retail investors. The awareness on debt has lagged,” he said.

Amid the extensive growth opportunity, the industry feels that finding the right talent will be a challenge going forward considering the competition from other wealth management verticals like portfolio management services (PMS) and alternative investment funds (AIF). In the recent past, some star fund managers like Prashant Jain, Madhusudan Kela and Anthony Heradia have left the MF industry for other verticals.

“The times have changed. Alpha generation is getting tougher with the rising efficiency in the market. We will need the best of the talent to outperform,” said Nilesh Shah, CEO of Kotak MF.

Nimesh Shah of ICICI Prudential MF said the way forward is to maintain a large pool of analysts. “We have never recruited a fund manager from outside. Fund managers have shifted and we have always had the talent to fill in. This helps maintain continuity in performance,” he said.