From the inception of our AMC, we have been reasonably diversified in our approach and have consciously tried to tap into cities beyond top 30. This has led us to have a good proportion of our flows coming from such smaller cities and towns. We continue to believe that there is a vast opportunity for growth in both T30 and B30, and our strategy is to make the most of these growth opportunities.
Direct plans are a good option for informed investors. However, they often attract even uninformed investors because of their lower fees and the hope for higher returns. We feel that such investors often underestimate the need to be hand-held through the risks prevalent in the markets and are often left feeling short-changed by the asset management industry when they encounter situations of volatility.
Given that the level of financial literacy among many investors still remains low, we don't think proliferation of direct plans will eat into the space of regular plans in any substantial way. Both direct and regular plans should continue to grow well.
Impact of new expense slabs
We believe it is a path-breaking step that not only provides a level playing field for smaller AMCs that do not have a treasure chest and are often bulldozed by larger players, but also will over time lead to a much more efficient industry.
Key challenge
For small AMCs, the challenge is that they are more dependent on intermediaries due to a low level of brand awareness. The changes in the intermediary-compensation structure in the last one year have affected the working of intermediaries, which has also affected smaller AMCs more than larger ones.
This article was originally published on December 09, 2019.
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