Suresh Soni, CEO, Baroda Mutual Fund, answers questions related to key industry issues
06-Dec-2021 •Research Desk
Revision of expense slabs by the regulator, the push towards passives, and the anticipated entry of several new AMCs translate into a greater focus on cost. Do you believe there is potential to drive the costs (expense ratios) down substantially from the current levels while still running the business profitably?
The Indian mutual fund industry has a long track record of creating alpha for investors. Over the long term, most active managers have outperformed the benchmarks by a good margin, thereby justifying the cost of active management. Also, as the industry grows, automatically the benefit of scale gets passed on to the investors since the expense ratio comes down with growth in AUM.
Passive funds offer market exposure at a low cost and have seen increased participation from investors in recent times. We believe that given the huge untapped potential for the mutual fund industry, there would be ample scope of growth for both active and passive funds.
It is good to see new entrants in the industry. This will offer more choice to customers and help expand the market.
How is the increasing proliferation of direct plans and the new age platforms changing the dynamics between the three key stakeholders - the investors, the distributors, and the manufacturers (AMCs)?
While there has been a growth in direct plans, distribution partners have an extremely important role to play in creating awareness, bringing in new clients and hand-holding them through market volatility.
Investing is an exercise of forsaking current consumption to achieve future goals. Distributors play a very important role in bringing investors on this path and helping them in the journey towards their financial goals. A vast majority of investors will continue to come to the industry through distributors. However, there will be a section of investors who want to DIY (do it yourself), who will choose direct plans.
Over the last few years, we have seen rapid growth in mutual fund platforms. This has helped expand the market and has attracted new clients and also eased the transaction process. We will see technology play an increasing role going forward for all constituents of the mutual fund industry.
Rapid-fire questions:
Factor-based mutual funds: Fit or flop?
