Domestic mutual fund industry should be innovative in the areas of cost efficiency,product design and positioning of products to attract more investors,a CII-PWC report on mutual funds said.
“Drastic changes may not be warranted,instead,the purpose may be better served by adopting a cluster of key initiatives in the areas of cost efficiency,product design and positioning,alternative distribution model,revenue diversification and capacity creation,” the report said.
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It also said that a sensitive regulatory environment would support the evolution of the industry.
Mutual fund industry shrank by 16.5 percent to Rs 5.87 crore by the end of March 2012 against Rs 7.03 lakh crore in the same period previous year,because of rising redemptions. “Volatile market conditions in the last two years have led to net withdrawals to the tune of Rs 49,406 crore in FY11 and Rs 22,023 crore in FY12,” the report said.
About the key challenges faced by the industry,the report said that issues related to distribution and penetration persist.
The report also pointed out that there is a proliferation of mutual fund schemes. “Overlapping schemes may be analysed and the possibility of merging overlapping schemes or discontinuing such schemes with a less than optimal AUM size could be evaluated without prejudicing investors’ interest,” the report said.
It also said that mutual fund houses should explore alternative areas of services. “It will be useful to explore alternative areas of services that have a meaningful impact on not just the revenue but on profitability as well.”