Invest In India

The MF industry has become either growth-centric or distributor-centric or league-table centric, and somewhere the industry has forgotten that it is serving investors.
Assets under management (AUM) at Indian mutual funds (MFs) plunged from Rs5.99 trillion in May to Rs4.6 trillion in January, as investors ran for the exits amid the market meltdown. To add to the industry’s woes, fresh inflows have stopped despite MFs offering new products. In an interview, U.K. Sinha, chairman and managing director of UTI Asset Management Co. Pvt. Ltd, which manages assets worth about Rs50,000 crore, says the problems are largely of the industry’s own making. UTI Asset Management was created in 2003 after the bifurcation of the former Unit Trust of India into two units managing assured return and market-linked investment plans. The other unit was named Specified Undertaking of UTI (SUUTI). Edited excerpts:How challenging are the times for the industry?The mutual fund industry is passing through challenging times and the industry has to change its practices and again make itself investor-centric. They had become either growth-centric or distributor-centric or league-table centric, and somewhere the industry has forgotten that it is serving investors. So, this is a reminder for the industry that it has to work for the investors. And if the industry does not do it, it will suffer badly. It is already suffering. It will suffer even worse.
At this time, the industry should make a serious attempt to sell what is good for the investor and I am not finding a very serious attempt towards that. The industry has also been engaging in the practice of somehow increasing assets under management. The game of getting a higher AUM at any cost is continuing… The sad part is that all these assets are short-term assets. So, to show that the industry has grown to (Rs)5 lakh crore is entirely misleading. Hardly 27% of the total assets of the industry are in equity. So whom are we trying to fool? It is short-term assets that they are focusing on and even paying money, they hardly get any revenue there. Revenue earning for short-term assets is negligible. In fact, it is a loss-making thing and even then they are doing it. Fresh sales have come down substantially. I am sure some of the mutual funds will be loss-making. Even earlier, very few mutual funds were making profits. I am sure in 2008-09, even lesser number of mutual funds will be making (a) profit. So, if the industry continues to behave like this, it will come to grief.