The continuing trend of financialisation of savings in India is a big opportunity for all mutual fund players and is likely to lead to a massive asset build-up for market-linked products. While direct plans are gaining popularity, we feel that good advice from experienced intermediaries will continue to play a significant role in ensuring investor satisfaction and consequent build-up of mutual fund assets in India.
We have invested significantly in upgrading our digital ecosystem to ensure that our distributors as well as investors have a seamless journey. At this juncture, we are not keen to launch any pure ETFs but we are evaluating some low cost and time-tested investment strategies of Robeco for suitability amongst Indian retail and institutional investors.
B30 has been a focus area for our business expansion, especially with the support provided by Canara Bank's extensive pan- India reach.
Impact of new expense slabs
New expense slabs have impacted AMC margins significantly with an obvious impact on business models for all industry players. The one big negative appears to be the widening of the relative disadvantage for the mutual fund industry vis-a-vis other businesses like life and general insurance, real estate, banking products, etc., where margins tend to be much higher and hence businesses could invest for enhancing growth rates across untapped segments. These changes, while shrinking profitability for everyone in general, do bode relative advantage for good-performing small- and mid-sized AMCs. On the positive side, with overall costs for investors going down and coupled with a good long-term performance track record of the majority of industry schemes, the attractiveness of mutual funds amongst Indian investors is surely bound to increase.
Risk control in debt funds
Canara Robeco has always had a robust credit-risk-control framework. Ratings were considered but the weights given to them are not very significant. This has allowed us to avoid companies that have good short-term ratings but lower long-term ratings. At the cost of underperformance in peer returns, we have diligently followed the process.
Given the growing prominence of Indian markets amongst global investors, we feel that international economic and geopolitical developments will tend to have a much higher impact on Indian portfolios as compared to the correlation in earlier years. We are therefore watchful and alert to these developments as regards any portfolio changes that may be required emanating from the impact of such developments.