Structured manner

This figure is shocking given the fact that the MF industry’s primary objective – from the time it was set up in a structured manner – was to motivate households to invest in a rationale manner. What is more striking is the fact that this is the state after 13 years of privatization of the MF sector. Despite the presence of around 32 companies, the MF penetration as a percentage of household savings is a meager 3%. Even when we consider retail investors (those with an investable surplus of Rs.1 lakh and below), less than 15% of the money in the MF market belongs to them; High net-worth investors have undoubtedly overshadowed dodgy retail investors. With all this data, it is but quite apparent that MFs – which were ostensibly positioned as an instrument to multiply the hard earned money of small investors safely – have been hijacked by corporate India. This certainly is a worrisome affair, so much so that M. Damodaran at a recent CII Summit observed that “large investments by corporate houses in mutual funds could generate conflicts of interest; something needs to be done toget more types of money into MFs.”

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist)