Looking to Invest in Mutual Funds? This Fund's MD & CEO believes it's the Best Time to Do So
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For the common man in India, investments mean two things – land or gold. The alternative to investments that come in the form of stock markets or mutual funds are often dismissed as a risky business. But 2017 proved to be an exceptional year for mutual funds, with more and more people turning to invest in the same.
But when it comes to mutual funds, Mahindra Asset Management Company Private Limited, a sub company of Mahindra & Mahindra Financial Services, is taking it a step forward. It’s taking mutual funds to the smaller cities of India, to people who have not really been exposed to such investment alternatives.
Entrepreneur India caught up with Ashutosh Bishnoi, MD and CEO of Mahindra Asset Management Company Private Limited as he cleared the myth that all of India’s smaller cities are low on wealth and spoke about how after a few dull years, mutual funds saw a growth in 2017 and 2018 is going to be a year of catching up.
India’s Smaller Cities Will Drive the Growth
Even when they established the company one and a half years ago, they had a clear vision – to take mutual funds to smaller cities of India. But what they didn’t anticipate was the upswing in participation that fortunately worked in their favour. Bishnoi said that they focused very hard to go to markets that are smaller and thus launched their first fund in Varanasi, which is not a typical choice but they had a point to make. “Not surprisingly, the markets responded very well. In fact, from the first fund, we collected 120 crores, out of which 3 crores came from Varanasi, which is a unique phenomenon,” he said.
With that, there’s no stopping them from reaching out to smaller and deeper markets of India. With a marked presence in the North and West of the country, they are now looking at starting their journey into the South and East. They are also counting on their parent company, Mahindra & Mahindra Financial Services’ infrastructure to drive growth.
Mutual Funds – The New Favourite Investment
With traditional asset classes, whether it is real estate or gold, not offering the desired returns along with not too many good entry points, Bishnoi believes there is a lacklusture in their outlook which is why people are turning to mutual funds. While they are seeing a great beginning, Bishnoi also points out that the real problem is that there’s not enough distribution. The top 20 cities have distribution but once you move from there, it gets darker. “As we are moving to smaller markets, youngsters who are entrepreneurial in nature are seeing the mutual fund campaigns and are willing to join the distribution force. In the last one year, we have seen 25,000 new entrants as IFAs which is fantastic news as the base is only one lakh,” he said.
However, it is the understanding of the product that requires patience. People don’t know much about the products and there are many ponzi schemes out there which have duped people. “The multimedia campaign gives us legitimacy. We are spending crores in these campaigns and individually, each fund is carrying out its own financial literacy problem which is paying off,” said Bishnoi.
He also believes that SEBI’s move to have separate investment advisors and distributors, will bring in a structure into the distribution market and people will be able to choose where they want to invest.
Millennials – The New Target Audience?
All things savvy have the attention of millennials, and because they spend so much time on the Internet researching on various things, it has become easier to reach out to them. “Our presence in the virtual world with the right information is very critical,” said Bishnoi.
Understanding that millennials spend a lot of time on the Web but not necessarily use English as the preferred language, Bishnoi and team have put out the information in multiple languages.
“But we also know that millennials are not people who have a lot of money, for them SIP schemes work well,” he said.
Innovation in Mutual Funds
They have also partnered with start-ups who are distributors and run roboadvisory services. Bishnoi believes that fund management is a traditional business, where innovation is not necessarily the smartest thing to do. But where it does creep in is in terms of the timing of the introduction of a product, thinking through markets (building views that are based on research and numbers) and innovation through marketing. For example, they have recently launched a mutual fund scheme that will look at investing in mid-cap companies, something that not many will agree to. But Bishnoi and team prove with their statistics that mid-cap companies have great potential to turn into large companies (demonstrating the examples of US and China), and will thus be a great investment plan.
2018, will be a year of catching up with people who had held back on investments due to demonetization will now look at mutual funds for growth, believes Bishnoi. And that’s why he said, “This is a great time to invest in mutual funds.”