Mutual fund industry in India makes global waves, beats others in profitability: McKinsey

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Mumbai | Published: December 13, 2017 3:44:19 AM

India’s mutual fund industry is making a mark on the global stage. Its assets under management (AUM) has been scaled new peaks over the past two years and profit growth has outpaced its APAC peers, according to McKinsey & Company.

mutual fund, mutual funds industry growth in india, mckinsey report on mutual fundsThe Indian MF industry notched up an astounding 113% growth in assets over the past three years, driven by strong inflows (62%) and market performance (50%).

India’s mutual fund industry is making a mark on the global stage. Its assets under management (AUM) has been scaled new peaks over the past two years and profit growth has outpaced its APAC peers, according to McKinsey & Company. The Indian MF industry notched up an astounding 113% growth in assets over the past three years, driven by strong inflows (62%) and market performance (50%). India also outshone peers on profitability with margins improving by 15% during the FY13-FY17 period. The going has also been good for the industry globally, with AUM growing to $76 trillion in 2016. The APAC region’s assets under management grew to a record $13 trillion in 2016, up by 11% during the year. Healthy average net flow growth of 8% over the past three years helped in this growth. While APAC accounts for only about 17% of the global AUM, it accounted for 44% of the global net flows over the past five years. The strong growth in AUM globally, unlike in India, did not translate into increase in profits. “Several factors impacted revenue margins, including fee pressure, renegotiation of existing contracts, intensified price competition and a shift of the product mix towards fixed-income and multi-assets solutions at the expense of equity,” said Peeyush Dalmia, partner of McKinsey & Company, in a report.

At the 12th MF Summit held on Tuesday, Peeyush pointed out that the Asia-Pacificregion is currently confronting a paradox with business growing but profits declining. Profits in the APAC region fell by 4% in 2016. Historically, AUMs and profits have grown in tandem, but 2016 saw this trend diverge. The evolving regulatory landscape and changes in customer behaviour were seen as factors that could further exert pressure on profits.

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