Insurance companies have added more retail investors in the financial year 2010-11 than the entire existing retail community of the mutual fund (MF) industry. Analysis of policy as well as folio figures ? an indicator of retail investor figures ? for insurance and MF industry respectively showed that private insurers have not only caught up over the decade, but are today way ahead of MFs in terms of retail reach.

As per latest available Securities and Exchange Board of India (Sebi) data, there were 3.02 crore MF retail folios in March 2002. This figure grew 53% to 4.63 crore. In contrast, about 4.8 crore new retail policies were added by insurers in FY11 including single and non-single premiums, as per latest Insurance Regulatory and Development Authority (IRDA) data.

Folio numbers as well as number of policies are not akin to retail investor numbers. This is because a fresh folio/policy number is created everytime a new investment is made, even if it is from an existing customer. Ball park estimates by the MF industry hint at an MF investor holding, on an average, eight folios today. By that logic, we have close to 58 lakh investors today.

Distributors hinted that earlier (during 2002 times), an investor held four folios. This puts the overall number of investors in 2002 at 76 lakhs. This means that about 18 lakh investors have exited the MF industry during the period between 2002 and 2010.

While the above figure can change depending on what is the assumption of the number of folios held by an investor, it is certain that MF industry has only lost investors during this period.

Deepak Chatterjee, managing director at SBI MF says, ?Unfortunately in India people buy insurance schemes to get equity returns when it should be only used to manage risk.? He however added that the MF is an asset class where investors get products suited to their risk profile and that in the time to come folios of mutual funds will certainly go up as penetration increases.

Private life insurance players who started operations in early 2000 have a wider reach today. They have more assets, employees, agents as well as policies.

According to Boston Consulting Group (BCG),a management consultant, life insurance policies today are 10 times that of Mutual funds. While the overall folio figure stands at 4.2 crores for MFs, it stands at 42 crore policies for life insurers. The BCG report added that number of employees in the life insurance industry was 15 times that of the MF industry, while agents and offices were 30 and 10 times respectively.

The mutual fund industry in the past has been under severe criticism from Sebi for not expanding its reach beyond the major metros. The top 10 metros today constitute 74% of overall MF assets with Mumbai and Delhi constituting the bulk of the market share.

However, some feel the tide is turning. Karan Datta, national sales head at Axis MF says, ?In the last few months we have seen some incremental flows into the schemes through systematic investment plans (SIPs) and we believe that this is the best way to increase the folios of the

MF industry.?

According to CAMS, a registrar with a dominant market share in the mutual fund industry, the number of SIP registrations per month grew at 160% over the year ending

August 2010.

This worked out to about 2 lakh monthly registrations, which is nothing but new folios. While this could work to the advantage of the mutual fund industry, a lot of catching up still needs to be done by MFs , feel experts.