Pvt MFs Have Excelled In 25 Years, But Still A Long Way To Go
The mutual fund industry has come a long way since 1993, when the first private sector players entered the space. In July 1993, Kothari Pioneer, a joint venture between Chennai-based Kothari Group and US-based Pioneer Mutual Fund, was the first private sector asset management company to get licence to launch MF products. Prior to that, the MF space in India was largely dominated by government-owned institutions and banks. But contrary to the general expectation that entry of private players would take the industry growth to the next level, the MF space remained a non-starter even after the entry of foreign firms such as Morgan Stanley. For the next ten years, AUMs of the industry grew at a laggardly rate of 10.5 per cent per year.
However, the next 15 years (2003-2018) saw a remarkable increase in the AUM growth rate, growing at a rate of 21.5%. Now, the mutual funds have emerged as the dominant vehicle for the retail investors to channelise their savings. It is a result of all-round efforts by the regulator Securities & Exchange Board of India (SEBI), which enacted the right kind of pro-investor policies, and the industry body Association of Mutual Funds in India (AMFI), which left no stone unturned to increase awareness about the product among the masses. Not to mention that the emergence of technology has been a primary enabler for better execution of transactions and growth of investments. Going ahead, the industry AUM is expected to grow by around 20% CAGR over the next five years to reach Rs 50 lakh crore. Technology will definitely play an important role in supporting such growth, however, a right incentive structure for distributors will play a prominent role in achieving this growth rate.
One of the most important lessons learned in the last 25 years is that there is no all-weather fund that will perform in every economic cycle. Nevertheless, there are all-weather portfolios that can help you to achieve your financial goals. Our cover story this time goes deep into how to create a winning portfolio. You do not need exotic products to create your portfolio—it can be done simply with equity and debt funds, along with the right amount of cash