Damodaran presages sector consolidation

The mutual funds industry is set to see more mergers and acquisitions (M&As) as it cannot afford to have many small players, M Damodaran, chairman of UTI Mutual Fund, said here on Saturday.

There are still over 33 mutual funds in the country managing assets worth Rs 1,40,000 crore. "The number of mutual funds in the country are not very large considering the population. But going by the size of those mutual funds and their disproportionate investment, one wonders whether some one somewhere is taking the investors for a ride," Damodaran said while putting up a strong case for consolidation in the industry.

Of the 33 funds, as many as 30 operate from Mumbai, two from Delhi and one is functional in Chennai. In the US, the number of mutual funds exceeded 7,000, Damodaran pointed out.

There has been growing M&As in the industry in the last two years with Principal acquiring Sun F&C and later PNB Mutual, while HDFC AMC gobbled Zurich Mutual Fund and Templeton taking over Pioneer ITI.

UTI MF has recently finalised acquisition of IL&FS mutual fund, and is also on the look out for more funds but Damodaran declined to name them.

Referring to the "plethora" of mutual funds schemes launched at a very high frequency and their complexities, he said, "We are frightening investors from coming to mutual funds. We need to come up with simple products for first time investors."

He attributed the lower-than-expected growth in the industry to the lack of investor awareness.