With inflows into mutual funds’ systematic investment plans (SIPs) clocking about ₹50,000 crore over the past year, they could emerge as a significant buffer on Dalal Street to offset the volatility caused by fickle foreign portfolio flows, said Rajesh Patwardhan, chief marketing officer, LIC Mutual Fund.
Having grown from an asset base of ₹14,000 crore last year to ₹25,000 crore this month, the 28-year-old fund house hopes to have total assets of ₹40,000 crore under its management in the coming financial year, Mr. Patwardhan, whose previous stint was with Deutsche Asset Management (India), told The Hindu .
Professional managers
An offshoot of India’s largest non-banking financial entity – the Life Insurance Corporation of India – LIC Mutual Fund has, over the past eighteen months, moved away from its traditional approach of having LIC officials on deputation steering the ship and roped in professional managers with experience in the asset management industry.
“In recent years, we have had an average FII inflow of $14 billion a year into our markets. If we raise the level of India’s retail investors opting for monthly SIP investments to at least half of that figure, it would act as a significant hedge against the FPI (foreign portfolio investments) factor,” the fund’s marketing head said.
Mutual fund inflows from SIPs – under which a fixed amount is invested every month into a specified mutual fund product – have touched ₹4,200 crore a month or roughly ₹50,000 crore a year. At LIC Mutual Fund, SIPs account for about 19% of its 3.35 lakh investor folios, with committed monthly inflows rising from about ₹9 crore a month last year to ₹15.5 crore.
“We want to tap our parent LIC’s strong network of 12 lakh life insurance agents and the trust people have in its brand to raise the SIP book significantly. Our partnerships with banks like Corporation Bank, under which mutual fund investments can be made via cash deposits upto ₹50,000 at its branches, should also help bring in more rural investors,” he said.
Better returns
With returns on bank deposits and monthly income schemes going down, LIC Mutual Fund is betting on a greater demand for alternative investment options that generate better returns in smaller towns and rural India as well.
“In our balanced fund, for example, we have been trying to give out a regular dividend on a monthly basis, based on market conditions and available surplus, of course. The idea is to get people to see it as a viable option for regular income,” he said, adding that this idea will be used in more of its schemes in the future.
The fund house is also developing a mobile application to improve the ease of doing business for investors.
“The challenge for financial advisors is to convince a client about mutual fund as an investment that they can trust. Once they have crossed that hurdle, they shouldn’t need to come back to collect forms, but enable the investors to invest right there and then in a manner that they can use easily going forward,” he said, adding that LIC MF was one of the first to allow payments through the Unified Payment Interface.
A proposed central KYC regime, that will enable an individual to invest across the financial sector as long as their KYC requirements have been captured by a service provider, could be a game changer for raising the share of financial savings in India, Mr. Patwardhan said.
“The common central KYC regime is held up as some players are uncomfortable about sharing data, but eventually, I think such those concerns shouldn’t come in the way. The Association of Mutual Funds in India should also enable online investments into different fund houses’ products on a single platform rather than the current system of each fund house having a different module on their own websites,” he pointed out.
