Our brand and philosophy are our biggest strengths. The Tata brand is more than 100-year old and has consistently stood for integrity, values, ethics and quality. Tata Mutual Fund carries the legacy of the Tata Group.
Our weakness is shadowed by our strength. While 20 years may seem long, we are still young in the history of the Tata Group.
Challenges ahead
One talks about a lack of investor education about mutual funds. There is a bigger challenge once they accept mutual funds and that is how we will educate our investors without driving them away from equity culture due to inherent risks.
I always worry about retail-investor behaviour. About once every decade since the early 1920s, investors have redeemed heavily from both stock markets and bond markets, causing markets to crash.
The financial markets of the world are closely interlinked today. Technology will bring market efficiencies closer to the investor but at the same time expose us to higher financial risks.
In the West the case of indexing has tended to be very strong. A majority of fund managers are not able to beat benchmarks. This is not the case in our mutual fund industry. Will this trend continue or change and if so how will it impact the investor?
Active mid-cap funds have given returns in excess of 26 per cent over a three-year period, while large-cap funds have shown a performance of around 13 per cent for the three-year period. Managing risk-and-return expectations for our investors will dominate the landscape in the coming years.
Competition
Let us look at the mature mutual fund industry in the United States. There are over 867 financial firms around the world competing in the US markets to provide investment management services to fund investors ($17.8 trillion, end of 2014). Our mutual fund industry is limited with just over 41 players for an industry size of less than $200 billion.
In the United States for a population of over 318 million, you have nearly 90 million investors - investor penetration of 28 per cent. There are over 123 million households and nearly 53 million (43 per cent) of them own mutual funds. Compare that to India. We have just around 4.32 crore aggregate folio count. We have just over 17 crore PAN holders in a population of over 1.25 billion.
Retail reach
The Tata Group's Vision 2025 aims to touch the lives of 25 percent of the world's population. We are here with a mission and the vision will make us reach as many retail investors as possible. The potential of reaching investors in our country is vast. We have over 17 crore PAN holders in a population of over 1.25 billion - you do the maths for potential new investors!
This article was originally published on December 09, 2015.
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