The great shift in Indian mutual fund industry

The Indian mutual fund industry has come a long way in last five years, thanks to the proactive regulation by regulator and also to the heavy promotion by the industry body. In last five years, there has been a significant surge in equity oriented funds. The share of equity oriented funds has increased from 27 per cent of the overall Assets under Management (AUM) in FY13 to 45 per cent at the end of FY19. Apart from regulations, what also helped such an increase in the share of equity schemes is the rise in equity returns and at the same time, lower returns from other asset class such as gold and real estate. This led to investors increasing investment in equity.

When we compare this with the world average, share of equity schemes is on the higher side in the Indian mutual fund industry. Equity schemes in USA (which has a strong equity market culture and one of the most developed capital markets) account for 54 per cent of total AUM. In UK, it is 45 per cent whereas in France and Germany it accounts for 25 per cent and 21 per cent respectively of the total AUM. The equity AUM in China and Brazil is much lower at less than 10 per cent.

The shift in asset class was observed across both individual and institutional investor segments. The increase in equity oriented mutual funds was primarily contributed by the individual investor segment. The AUM of the retail segment has increased at a rate a CAGR of 29 per cent between FY14 and FY19. At the end of July 2019, equity oriented schemes derive 88 per cent of their assets from individual investors including HNIs.