The Indian mutual fund industry is primarily debt-oriented with debt funds forming 64% of the AuM. Low penetration and lack of awareness is hurting the industry. There are just over 3,800 mutual fund folios per lakh of population in India as against over 50,000 savings bank accounts and over 26,500 life insurance policies. Market regulator SEBI recently announced wide-ranging reforms to provide incentives to fund houses for expanding to small cities, but these may lead to increased costs for investors. Source: www.cafemutual.com
USA The world leader in mutual funds, the US industry manages USD 13 trillion, accounting for 57 percent of global assets. An impressive 44 percent of American households own mutual funds with defined contribution plans making up one-tenth of US households aggregate financial assets. The first open end fund which was launched by Massachusetts Investors Trust in Boston way back in 1924 is in existence even today. In the 1970s, the industry got a major boost through money market funds which were able to offer competitive returns due to the restrictions imposed on bank interest rates.
United Kingdom With an 81 percent share, institutional clients account for a major share of the UK fund market. UK’s asset management firms earned a combined revenue of USD 17 billion in 2011 on an AUM of USD 1.02 trillion. The main distribution channels are private banks, retail banks, fund supermarkets and IFAs. Unlike the rest of Europe where many AMCs are controlled by banks, in UK only 18 percent AMCs are owned by banking groups while insurance firms control 17 percent and 65 percent are independent.
Japan Mutual funds are known as Toushin in Japan. It is the eight largest fund industry in the world and the second largest in the Asia-Pacific region. There are 3,937 funds in Japan managing USD 674 billion. Japanese individuals invest 4 percent of their personal savings in mutual funds. The growth of the industry somewhat stagnated after the collapse of Tokyo stock market in 1990. Nomura, Nikko and Daiwa are the largest asset managers in Japan.
China Typical of China, in spite of being a late entrant in mutual funds, it is now one of he largest and fastest growing markets. Currently, 73 AMCs manage USD 380 billion through nearly 1,000 schemes. The growth of China’s mutual fund industry is fuelled by retirement funds (similar to 401k) which give tax breaks in equity investments. Though 31 foreign groups have entered the Chinese mutual fund industry, domestic partners have an overwhelming control. Recently, China has allowed foreign banks to sell mutual funds.
Canada Canada’s 80-year-old mutual fund industry manages USD 834 billion. There are around 150 mutual fund firms in Canada employing more than 90,000 people. Mutual funds and mutual fund wraps account for nearly 30 percent of Canada’s financial wealth. Much like what has been recommended by SEBI recently, Mutual Fund Dealers Association is the self-regulatory organisation (SRO) that regulates mutual fund dealers. A majority of Canadian advisors earn from trail fees with some advisors charging a flat percentage fee, irrespective of asset size.
Thailand The first mutual fund was formed in Thailand in 1975 by the Thai government in association with the International Finance Corporation (IFC). Since then, the regulator has allowed more entrants. Currently, there are 23 AMCs in Thailand managing USD 93 billion, equal to 19 percent of the country’s GDP. The industry has seen rapid growth over the last 15 years with the number of mutual fund investors going upto 29 lakh from eight lakh mutual fund investors in 1997.
France France is home to 608 AMCs of which 150 AMCs have come up in the last five years. The industry which manages USD 1.56 billion employs 83,000 people. Banks and independent advisors are the major distributors of mutual funds. In terms of AUM, France is the leader in Europe with a 20 percent market share. In France, a majority of AMCs are owned independently with another 27 percent being owned by banks. France’s PERCO, a pension plan accounts for one fifth of direct and indirect holding of French equities in households financial wealth.
Hong Kong The country manages a large pool of non-resident money through mutual funds, aka, unit trusts. The golden period for the industry was from 1992 to 1998 when Hong Kong’s mutual fund assets skyrocketed from 16 percent of GDP to 52 percent. It has a large equity fund market though bond funds are becoming hugely popular in the wake of financial crisis. The industry assets under management stood at USD 743 billion. Equity funds in Hong Kong charge 5-6 percent initial charge for front loads.
Australia With an AUM of USD 1.72 trillion, it is the fourth largest mutual fund industry in the world. Australia’s mutual fund industry companies real estate investment trusts, boutique funds and ETFs. The growth of the Australian fund industry is mainly due to its mature financial market, large investor base and Australia’s compulsory retirement income (superannuation). It also has a large retail investor base. Introduction of mandatory retirement income system in 1992 saw assets under management grow by 11 percent with the AUM doubling since 2003.
Pakistan With an AUM of USD 2.6 billion which is less than 1 percent of Pakistan’s GDP, the Pakistani mutual fund industry has a long way to go. Low savings rate has been an impediment to the growth of the economy and the mutual fund industry. The industry is dominated by institutional investors with investor accounts being less than two lakh. Though the industry grew rapidly from 2001-2007, the financial crisis has nearly halved the industry’s AUM.
Italy Though mutual funds emerged in Italy in 1984, it is the second biggest market in continental Europe after France. With more than 302 AMCs, its market share in Europe’s AUM stands at 5 percent. The industry kick started during late 1990s when government bonds lost their shine and interest rates dropped, leading to money shifting to actively managed bonds. The industry today manages USD 1.27 billion. 51 percent of AMCs are owned by independent players, followed by banks.
Luxembourg Liberal rules and minimal taxes make it one of the most sought after places for asset managers. It is the world leader in cross border fund distribution. Luxembourg domiciled investment structures are distributed in more than 70 countries and account for more than 70 percent of UCITS funds distributed internationally. The country also offers a variety of attractive fund structures in terms of Shariah-compliant investment funds, microfinance investment vehicles and sustainable and responsible investment vehicles.