Rs 100 trn AUM? Just 3-4 years away, say mutual fund CEOs at BS BFSI Summit

Heads of mutual fund companies discuss the path to reaching Rs 100 trillion in conversation with consulting editor Tamal Bandyopadhyay at the Business Standard BFSI Insight Summit

At the Business Standard BFSI Insight Summit on Thursday, top leaders of India's mutual fund companies expressed confidence that it will take no more than three to four years for the industry’s assets under management (AUM) to reach Rs 100 trillion.

 

During a discussion with Business Standard consulting editor Tamal Bandyopadhyay, A Balasubramanian, managing director and chief executive officer of Aditya Birla Sun Life Mutual Fund, emphasised that the focus is not solely on achieving an AUM of Rs 100 trillion but on expanding the investor base. "It's not about the AUM of Rs 100 trillion; it’s about the number of investors," he said.

 

 

He further projected that, in the coming years, the AUM of the mutual fund industry could reach half the size of banking deposits.

 

Balasubramanian noted that confidence in the equity market has strengthened, as mutual funds have consistently provided "the most predictable and stable returns." He added that more people now understand "the power of compounding" and that mutual funds have become an investment vehicle not only for retail investors but also for high-net-worth individuals (HNIs). Currently, 23 per cent of the mutual fund AUM is sourced through banking channels, with the remaining growth being organic, he said. 

 

  Discussing investments in the mutual fund sector, Navneet Munot, managing director and chief executive officer of HDFC Mutual Fund, said he is pleased to see investment flows coming from smaller towns, describing this as one of his "biggest satisfactions." Munot highlighted the crucial role of retail investors, whom he referred to as "the real heroes," adding that retail assets under management are now larger than those of institutional investors.

 

While recognising the need for both domestic and global investors, he remarked that "the percentage from household savings towards equity is still small."

 

Munot further stated that "local investors absolutely have the needed stomach," as systematic investment plan (SIP) inflows continue to rise, bolstering his confidence in a stable and growing flow of funds over the next three to four years.

 

On the topic of SIP, DP Singh, deputy managing director at SBI Mutual Fund, said that in October, SBI Mutual Fund saw a 4 per cent increase in SIP contributions compared to September, despite market volatility. Singh noted that the continued rise in SIPs during uncertain market conditions suggests an irreversible trend, indicating further growth in SIP investments.

 

Radhika Gupta, managing director and chief executive officer of Edelweiss Mutual Fund, is optimistic about the growth of the mutual fund industry, predicting a future far beyond Rs 100 trillion. "Let's talk about 10 times the Rs 100 trillion number. Rs 100 trillion will happen soon—in 2-3 years," she said.

 

Discussing the rise of SIPs, she noted a generational shift in India’s financial habits, adding that "anyone below 30 years of age is doing an SIP or something with stocks from their first salary."

 

She also highlighted the evolving diversity within the industry, where "45 mutual funds and 20 more are waiting to get licences, most of which are not bank-backed." Gupta remarked, "I don’t think distribution is only bank-backed. It exists in lots of different cohorts."

 

According to her, fund houses with quality products and a strong digital presence can grow regardless of backing, as "the consumer has taken purchasing power in their hands."

 

Discussing the flow of funds to small-cap and mid-cap funds, Nilesh Shah, managing director of Kotak Mutual Fund, said, "We have been advising people to invest with a longer-term horizon. Second, we are requesting people to moderate return expectations. With these two, I feel small- and mid-cap are fine."

 

On distribution networks for AUMs, Munot said, "Any asset management company with an interesting proposition has benefitted from the wider distributor community." He emphasised that effective engagement with distributors allows asset management companies to reach a broader audience and enhance their growth potential.

 

Furthermore, Balasubramanian predicted robust growth for the mutual fund sector, stating, "In the next few years, the mutual fund industry will become the largest distribution industry."