AMFI's 'Mutual Fund Sahi Hai' campaign has contributed significantly to the proliferation of direct investments and has brought many new investors into the mutual fund fold. While there is a thrust towards cheaper access to mutual funds for investors, it is being brought about largely by advisors under the registered investment advisor (RIA) licence. This, we believe, is the future of investments.
Industry trends (source: AMFI as on August 31, 2019) show a rise in exchange-traded funds (ETFs) in the past couple of years, signalling a rise in passive investing, albeit concentrated around only 20 lakh folios. While passive investing will gain traction in the years to come, we believe that in the near future, the Indian equity markets have a lot of alpha-generating capabilities.
Mutual funds are gaining traction in B30 cities. Approximately, 10 per cent of our AUM (as on 30th September) comes from B30 cities. We are of the belief that we would like to establish ourselves better in the T30 locations before we go deeper into B30 ones. Meanwhile, sustained efforts to bring B30 distributors onboard with our investment philosophy will continue.
Impact of new expense slabs
It is a welcome change for investors and service providers. For the investor, the new expense structure brings down the cost of investing in mutual funds. This will aid mutual fund penetration in the country. From a small fund house's perspective, the gradation in the total expense ratio (TER) enables us to differentiate our proposition better. We believe that this is one step that could help fund houses achieve financial viability faster than before.
Risk control in debt funds In our case, the credit decisions were always guarded by a strong credit policy with stringent criteria of financial filters for screening individual credits and governing our exposure to various sectors. The fund house's credit research remains independent. The final approval on any issuer limit and tenure is done on the basis of collective decision-making through a credit committee. An independent risk team monitors all the investment compliance guidelines and adherence to the credit policy.
Moreover, BNP Paribas Trustee India Private Limited (trustees of BNP Paribas Mutual Fund) has approved incorporating provisions of segregated portfolios in the scheme information documents (SID) of all fixed-income and hybrid schemes.
Key challenge Given the stage at which we are, the major challenge before us is taking all three main stakeholders, namely, investors, channel partners and the organisation itself together on the journey towards prosperity. Our efforts are focused towards striking a fine balance between offering the best-possible risk-adjusted products to our investors, ensuring growth for our channel partners, and conducting business ethically and morally within the regulatory parameters in both letter and spirit.