Fintechs make their presence felt in MF space, see sharp growth in assets

Ease of access, innovative analytical tools and lower investing cost helping them score over traditional players

Fintech companies are making their presence felt in the Rs 34-trillion domestic mutual fund (MF) space. Ease of access, innovative analytical tools and lower cost of investing offered by fintech players are encouraging investors to shun the traditional way of investing in MFs.

Groww, Paytm Money, Zerodha and Kuvera are fintech companies that offer mutual fund products on their platforms.

The assets under management (AUM) mobilised through fintech MF distributors has jumped 2.4 times to Rs 27,463 crore in 2020-21 (FY21) over FY20 in the equity segment, as per a note by IDFC MF.

A large part of this growth is on account of the jump in the stock market. However, other data points also indicate that the new-age MF distributors are stamping their authority. For instance, the systematic investment plans (SIP) registration increased nearly 60 per cent for the period under comparison. Also, the debt AUM more than doubled Rs 5,099 crore in last fiscal as against Rs 2,182 crore in FY20.

Sirshendu Basu, Head – Products at IDFC AMC said this growth is dominated by first-time investors, who are looking to invest on their down and see investing in MFs as a step in the right direction.

“Fintech players can provide relevant information like past returns, risk metrics, and objectives of the funds making their investment journey comfortable,” he said.

Participants in the industry said that analytical tools, such as return on investments offered by the new-age MF platforms, appeal to investors that are inclined towards direct investing in stock markets.

Notably, even when equity funds were witnessing net outflows for the most part of last fiscal, fintech players continued to witness a surge in their assets. The timely notification sent through mobile apps reminding investors to continue with their SIPs has helped these platforms garner assets.

“In the last few years with the digitisation of the entire investment process, the demand for direct plans has become very broad based across age groups and large and small cities alike. People who were shopping online have now realized that they can invest online too,” said Gaurav Rastogi, CEO at Kuvera.

Presently, most fintech MF distribution platforms don’t charge commissions and mostly offer direct plans, where the so-called total expense ratios (TERs) are lower. It remains to be seen if MF distributors will have the same appeal once they begin to charge commissions.

Seasoned investors still prefer investing through the portals of asset management companies (AMC). The process is more transactional in nature as such portals allow only to invest in their own funds.

Whereas, fintech players offer schemes offered by most registered fund houses, which helps investors consolidate their entire portfolio at one place.

Industry observers say the trend to invest through fintech is largely done by the young investors, while the high networth individuals (HNIs) and ultra HNIs still prefer to investing directly or go by the advice of a financial advisor.

The sharp up move in the market over the past 15 months has boosted investor sentiment. Experts say if markets turn choppy or go into a correction, the do-it-yourself way of MF investing could get challenged.  

“Also, a lot of investors have come in because the recent returns have been good, but if returns do not continue a lot of these new investors may also not continue investing in funds,” added Rastogi.