Mutual Fund

Document Sample
Mutual Fund Powered By Docstoc

Built on Strong Foundation
    India Demographics

         Indian : Key Drivers – Changing Demographics

                                                                This slide is for 2007 – if
                                                                data not readily avlbl – pl

India's working-age population pool is the largest in the world, and is expected to increase significantly
over the next four decades.

   Disposable Income and Improving Penetration

        The domestic market is expected to expand significantly over the next 20 years.
        • In 2005, people with a disposable income of $10,940 or more contributed just $79 billion in aggregate
        disposable income. This is expected to increase exponentially by 2025 to $932 billion.
        • Aggregate disposable income for households with an income between $4,380 and $10,980 per annum is
        also expected to grow exponentially to reach $670 billion by 2025.


        Investment Rate - India & China Leading in World

SOURCE: CEIC; Haver Analytics; McKinsey Global Economic Growth Database; World Development , Indicators of the World Bank; McKinsey Global Institute

    Break up of total gross savings rate sector wise % of GDP for 2009

SOURCE: CEIC; Haver Analytics; McKinsey Global Economic Growth Database; World Development , Indicators
of the World Bank; McKinsey Global Institute

Break up of total gross savings as % of GDP Trend

MF Industry Facts & Trends

Asset Wise Break up of Individual Wealth In India

Source Karvy Indian Wealth Report Sept – 2010

                 Location Wise Break up of Transactions in 3 Asset Classes
                              for Top 10 Locations April 2011

                                  Equity          Income              Cash
       Mumbai                     46.10%          43.42%              84.38%

       Delhi                      17.63%          21.24%              6.79%

       Kolkata                    17.02%           3.70%              2.20%

       Chennai                    5.49%            5.21%              1.59%

       Bangalore                  4.93%            5.36%              1.60%

       Hyderabad                  1.71%            2.76%              0.35%

       Pune                       3.81%            2.07%              2.58%

       Ahmadabad                  1.61%           15.98%              0.48%

       Chandigarh                 0.82%            0.10%              0.01%

       Cochin                     0.87%            0.16%              0.02%

       Total                     100.00%          100.00%          100.00%

Karvy Computershare April 2011

Growth trend in Asset Management Business


• As markets mature , the shares of mutual fund in total assets
  only keeps on increasing.

• In 1982, US households had 67% of their assets into cash and
  bank deposits, which is the present situation in the Indian

• By 2002, the same fell to 44% as managed assets moved up
  from 22.8% to 42.5% during the same period.

• The Boston Consulting Group expects India to follow the US
              Mutual Fund Industry - India

• 41 Fund houses managing AAUM USD 155 Billion
   (INR 700538 Crs. As on 31-March-2011)

• Annual savings in India – USD 533.93 billion (2010)
  ( roughly 4.5 times 2011 March Closing AAUM – still a big scope )

• March 10 with with 38 AMCS Closing AAUM – USD 171 Billion

• March 09 with 25 AMC’s Closing AAAUM – USD 110. Billion
                         Growth Drivers
•   AUM in India is around 12% of GDP as on 2011 (AAUM USD 155 bln V/S Indian
    GDP USD $ 1296 ) significantly lower than other market. As markets mature, the
    shares of mutual fund in total assets only keeps on increasing.

•   Awareness of Mutual Fund products are increasing day by day. More
    sophisticated products to come in.

•   Global flavors like ETF gaining currency in Indian mutual funds now. Seen as
    next driver of growth.

•   Long term equity returns are higher than other investment assets

•   India has 50% savings in Cash & bank deposits (60% in non-urban areas),
    significantly higher than 20% in Asia pacific and global average of 13%.

•   Indian HNIs growing at a faster rate of 13.3% - HNIs invest 31% in equities

•   Under penetration - 10 cities account for around 80% of total industry AUMs.
    Expansion to smaller cities & towns already started

•   Institutional investors accounts for 65% of AUM. Retail investors yet to be

I Phase – 1964-87                                 II Phase – 1987-1993

1963 :Unit Trust of India (UTI) established      (Entry of Public Sector Funds)

1964 :First scheme launched by UTI               June 1987:SBI Mutual Fund first non- UTI
                                                  Mutual Fund established in followed by others.
1988 :UTI had Rs.6,700 crores of assets under
management.                                       End of 1993:Mutual fund industry had assets
                                                  under management of Rs.47,004 crores.
III Phase – 1993-2003
(Entry of Private Sector Funds)                  IV Phase – since February 2003 –Aug 2009
1993 :First Mutual Fund Regulations came into    2003:UTI bifurcated into two separate
1996:Substitued by comprehensive and revised
                                                  July 2009: 34 funds, managing Rs 5,40,000
Mutual Fund Regulations
January 2003:33 mutual funds with total assets
of Rs. 1,21,805 crores

V Phase- since Aug 2009
After the abolition of entry load
Paradigm change in distribution
Current size: Rs 6,45,000 crs (Dec ‘10)
41 Mutual Funds
Three waves of growth in the MF Industry

• The 1992 -93 wave

• The 2000- 2001 wave

• The 2006 – 2008 wave

• What’s different now ?

 Three pillars that will define the future

• Product will prevail

• Paperless

• Evolution of the “Agent” to an “Advisor”

• Performance
   – Properly benchmarked
   – Peer group comparison

• Portfolio
   – Honest to its investment strategy
   – Transparency and disclosure
   – Positioning

• Processes
   – Robust
   – Capable of capturing the “beta” and the “alpha”

• People


• Is it very complicated?
• Key to the success will be the adoption by Investors as well
  as the Advisor
   – will be encouraged if it adds value to him
   – Has to be a win – win
   – Applications have to be found which reduce the threat perception for
     wider usage.
   – Cost of servicing clients
   – Releases time for more value added services
   – Is the Stock exchange platform a threat ?
• Convenience to the investor
   – Gives scale and more choices
   – Improved logistic
   – 24 X 7

             “Agent” to an “Advisor”

• Impact of ban on no – load?
   – Short term impact: Shrinkage of business
   – Long term impact: Huge improvement of credibility
   – Wide publicity to this event has made Investor aware that
     IFA remuneration is now linked to client and not MFs
   – Therefore seen to be acting in the interest of the client
• Financial products are a business of Trust
   – Why else do AAA rated companies raise money at lower
     rates than AA or B+?
   – The same analogy applies to financial advise

       “Agent” to an “Advisor”……..contd..1

• Service that is provided by IFA extends beyond collection of
   –   Information at the beck and call of clients
   –   Investment advise
   –   Regular services – SOA, Redemptions, Nominations etc
   –   Updates on Dividend declaration
   –   SIP Renewal
   –   Financial Planning
   –   Asset Allocation
   –   Rebalancing

                  Disclaimers & Risk Factors
This document have been prepared by L&T Investment Management Limited (LTIML) for
information purposes only and should not be construed as an offer or solicitation of an
offer for purchase of any securities/ instruments or any of the Funds of L&T Mutual
Fund. Market views expressed herein are for general information only and do not have
regards to specific investment objectives, financial situation and the particular needs of
any specific person who may have receive this information. Investments in mutual funds
and securities markets inherently involve risks including possible loss of capital and
recipient should consult their legal, tax and financial advisors before investing. Recipient
of this document should understand that statements made herein regarding future
prospects may not be realized. He/ She should also understand that any reference to the
securities/ instruments/ sectors in this document is only for illustration purpose. The
views expressed are of LTIML, neither this document nor the units of L&T Mutual Fund
have been registered in any jurisdiction. The distribution of this document in certain
jurisdictions may be restricted or totally prohibited and accordingly, persons who come
into possession of this document are required to inform themselves about, and to
observe, any such restrictions.
Thank You

Shared By: