Challenges in Marketing of Mutual Funds in India

Challenges in Marketing of Mutual Funds in India

Abstract

This study tries to analyze the challenges faced by the mutual fund industry while marketing their products and also looks into these problems from the perspective of the industry as a whole. We also look into possible solutions to the problems confronting the industry and ways and means of implementing them. The positives of the industry from an investor perspective are also highlighted.

Keywords: Mutual Funds, Investors, Asset Management Companies, Distributors

Introduction

The first form of Mutual Funds, was introduced by the Central Government of India in the form of Unit Trust of India (UTI), under the UTI Act 1963, with the aim of mobilizing the savings of middle class and lower income groups, thereby giving them an opportunity to invest in capital markets. The security market at that time was under a controlled regime and was irrelevant to industrial growth. Until 1987, UTI enjoyed a monopoly in this sector, but post that few of the other government controlled financial companies came to the forefront and this included SBI, Canara Bank & Punjab National Bank.

Post the economic liberalization in India in 1991, this sector gained momentum and in 1993 private players were allowed to operate. Kothari Pioneer was the first private Mutual Fund to be set up in India, which later merged into Franklin Templeton India. Today we have about 47 Asset Management Companies (AMC) with Assets Under Management (AUM) of about Rs 11,86,000 Crores (AMFI 2015) across various schemes as per the latest data released by AMFI. HDFC AMC heads the list with the highest average AUM. The mutual fund industry has seen phenomenal growth in the last decade, but the penetration levels in terms of geographic area is limited. The bulk of the investors are still from cities. Moreover, only 10% of the savings are being routed into mutual funds and these are some of the areas of concern for the long term....