MF investors can create intergenerational wealth in 10-15 yrs
NEW DELHI: There is an opportunity to create intergenerational wealth in the next 10-15 years if investors remain committed to the market and exhibit financial discipline, says Madhu Nair, CEO of Union Mutual Fund.
According to him, the next 10-15 years is going to be extremely positive from an economic perspective for India and this will be reflected in the capital market as well, whether equity or fixed income.
He added that the last 20 years have been very good for investors as good mutual funds (MFs) have created wealth in the range of 18-20% per annum.
“The next 15 years is going to be the time when people in India can create intergenerational wealth. The US, Japan and China have seen this. Lots of people miss out on this opportunity to create wealth due to lack of discipline and patience. They really need to stay invested. Our attempt is to act as a bridge between the growth of the Indian economy and investors’ portfolio,” said Nair.
The CEO believes that the MF industry’s assets under management (AUM) can anywhere be between R140 lakh crore and R200 lakh crore in the next 7-10 years.
In the last decade, the industry’s AUM has grown more than 6 times- from R9.75 lakh crore in June 2014 to R61.16 lakh crore in June 2024.
In July, the AUM reached a high of R64.96 lakh crore, according to Amfi data. This growth has been supported by the continuous increase in Systematic Investment Plan (SIP) inflow. AMFI data showed that SIP inflows increased from R21,262 crore in June to R23,332 crore in July. It was the fourth consecutive month when SIP inflows remained above R 20,000 crore.
Nair said that the country’s growing stature in the global economy is a big positive for the domestic market.
“In the next 15 years, India can be treated as an asset class where there is compulsory allocation. At present, an investor from London and New York allocates 50% of his fund to the USA and 20-30% goes to China.
India receives allocation through emerging market funds. Depending on the view, we get overweight or underweight. This will change. In the next 3-5 years, India is going to be the third-largest economy. It is going to be very difficult for someone sitting in New York or London not to allocate in India,”
Nair said, adding that the company is evaluating having a presence in Gift City. “We have set up vehicles to get money from there to India. Then we have a Japanese partner (Dai-ichi) who can launch an India-dedicated fund in Japan,” he said. He also said that Union Mutual Fund is also mulling to launch portfolio management services (PMS), alternate investment fund (AIF) and offshore business.
Launch of new fund offer
Last week, the company, which had a total AUM of R16,111.46 crore as of June 30, announced the launch of the new fund offer (NFO) for Union Multi Asset Allocation Fund.
The NFO will open for subscription on August 20, 2024, and close on September 3, 2024. The scheme will allocate investors’ funds across various asset classes such as equity and equity related instruments, debt and money market instruments, units of gold & or silver exchange traded funds (ETFs), and units of REITs & InvITs.
Nair explained that they are focusing on certain pillars to boost growth and help investors achieve their financial goals. “In asset management companies (AMC), investment management is the core function. We have to focus here. So our first pillar is investment excellence. It is not going to be about being the number one fund for a year or two. It is going to be about consistency in performance. Second, you have to have a very strong investment process to select stocks and make a portfolio,” he said.
Nair added that one of the prime objectives for them is to look at enhancing distribution channels. He added that the consolidation of public sector banks has brought a big change for them.
“This has given us (Union MF) reach. We have now 16 crore clients- which is about 10% of the population and a R21 lakh crore balance sheet. They are familiar with our name. Our task will be how to push the right people with the right product to this client base and how to convert fixed deposit investors into MF investors,” he said.
For Union Mutual Fund, 50% of their business comes from MF distributors, 30% from Union Bank and the remaining 20% from institutional business. Nair said that they have 4000 MF distributors who work actively with them. There are 2 lakh MF distributors in India, of which only 40,000 are active.
When asked about his view on the current valuation of the equity market, Nair said that it looks a little overstretched as of now even for the large cap stocks.
He added that increased inflows from domestic and global investors into the markets has been supporting the rally.