Moneycontrol MF Summit: Communication, engagement with GenZ imperative to expand mutual fund investor base

He pointed out that, as per RBI data, over 65 percent of the investing population in India has parked its money in bank deposits and cash. “At the moment, we are selling small caps to them. We will get only that much. When we stuck our necks out and said, ‘Mutual funds sahi hai’, we took an aggressive stand for the first time. If we go out and say, ‘Debt sahi hai’ (investments towards) debt will come to us. The perception internally has to change,” he said.

Alluding to the view that a section of millennial investors is coming to mutual funds but not Gen Z, who are taking to digital gold or F&O, he said it is best not to judge risks, as they are already taking risks. “Our job is to talk about risk and leave it to others. That is where there is a perception issue. We should not be resisting change but accepting change and, in fact, playing ahead of change,” he said.

The frenzied chase for AUMs was the next topic of discussion. “I do not think everyone in the industry goes out and chases AUM. If we were in the food business, I could open multiple restaurants with multiple cuisines. We, at Edelweiss AMC, launch a lot of NFOs, while others do not. Some of us make that choice, and some do not. If a new AMC is choosing to launch five NFOs, the onus is on the advisory community to explain what makes sense and what doesn’t,” said Gupta.

She was of the view that the industry has more than enough products. “If we were to not do a single NFO or create a new category, we would be doing a service to ourselves. We would then focus on packaging them better. We have more than enough products – for instance, debt products with maturities in 2023 and 2037. We have every possible sectoral fund. We should now focus on how people use these products and solutions. We have 40 crore OTT users and 40 crore food delivery users. If you can start an OTT subscription, you can start an SIP,” she said.

Adajania referred to incidents that shook trust in the mutual fund industry. “Between how SEBI perceives AMFI and its hesitation to become a full-fledged SRO (self-regulatory organisation), is there a need for AMFI to do more to re-establish trust?”

Neil Parikh was of the opinion that even individual mutual funds need to make more efforts to bolster retail investors’ trust in mutual funds. “Before we started our mutual fund and were managing a PMS, a fundhouse had come to us to sell products. More than 100 schemes, all look the same. There was no answer to the question of why this and what that. We were only told that we would get higher commissions,” he said.

Now, market regulator SEBI has brought about rationalisation in commissions. He believes that the industry has solved a lot of problems over the last few years. The communication around mutual funds was nonexistent 10 years ago, but now it has improved. “Now, there are rules around categorisation – you can launch several schemes (in the same category). Now even commissions have been rationalised. We solved a lot of these problems in these 10 years,” said Parikh.

Adajania also pointed out that, primarily, the communication around mutual funds is in English, which may not work well in B30 towns. “Are mutual funds elitist or exotic?” was his next question.

“The scale of the problem is quite immense. B30 cities and towns account for 20-25 percent of mutual fund AUMs, but FD volumes are at 65 percent. It’s not that the wealth of India lies entirely in cities; it is distributed quite well across cities. There is clearly a huge opportunity in B30 markets as well,” said Mohan.

However, he refuted the suggestion that mutual funds were elitist products. “Retail is driving this extensively. A lot more needs to be done. For example, how do you use technology to expand your own product line beyond geographical constraints? English news, for example, reaches only 10 percent of Indians – 90 percent of the residents of Bharat speak their local languages. You need to tailor your content in different languages. It is easier said than done, as decluttering jargon and technical terms will be a challenge,” he said.

The industry is not driving a lot of discussion around debt mutual funds, choosing to focus on equities instead, as Adajania pointed out. “I do not completely agree with the statement that the industry is not doing enough on debt. It is possible that nine to 10 months down the line, the outlook will be a lot more positive. Once there is a rate cut, people will say it is a great avenue to invest in. We saw this in 2016-17,” said Kulkarni.

He also reasoned that since employees already have an allocation towards debt in the form of provident fund contributions, their portfolios have a significant amount of debt allocation. “We are more debt-heavy than equity-heavy in our portfolios. That is something people miss out on. Hence, the conversation around debt,” said Kulkarni.