If you think that clothes and watches are the only products that need a brand name to cash in on, then think again. For, experts believe even mutual funds need a well-known and dependable image to woo investors.
Fund mobilization trend in mutual funds space suggests that brand plays a important role in helping fund houses attract investors initially although in the long term it boils down to the performance of the schemes.
Brands are useful mainly for raising money from investors, while investment performance is adjudged by the market conditions and fund manager’s instinct. However, bigger brands are able to generate larger funds through their offers..
Country’s MF industry holds immense potential for the existing as well as the new players entering or those envisaging an entry into the space, but firms with a strong brand presence definitely has a competitive advantage.
A brand image is very important for mutual funds and investors base their decisions on known and dependable brands. Brand-building exercises are mostly taken up by foreign players and big industrial houses, who have deep pockets, while fund houses with lower corpus can only attract investors by showing good performance.
As per the market opinion, people feel that funds sponsored by foreign entities and large industrial houses engage in large amount of brand building exercise before launch or while introducing a new scheme, as they have large capital pools backing them.
Prime examples of such funds could be of Mirae Asset Global Management Fund, Franklin Templeton and those promoted by domestic majors like Reliance, Tata and Birla.
Also, mutual funds sponsored by banks gain from the image of security projected by the lender as investor feel more secure about their investment.
According to industry sources, the market that has quite a few big names has about 18 more MFs waiting to join the bandwagon, of which many are likely to be known brands.
Strong pipeline indicates investors in the country are likely to get numerous options to choose from depending on their preference for a brand or a good return giving fund.
Indian mutual fund industry has just scratched the surface till now and there is vast opportunity in the space with only 1.5- 2 per cent penetration in the urban areas, while Tier II and Tier III cities and rural areas are still untapped.
The importance of brands is echoed by new entrants as well such as Edelweiss Asset Management Co that has recently got nod from market regulator Sebi to start its MF business.
What initially attracts the investors is the brand name, while the thing that holds them in the long term is the performance of the fund.
Edelweiss AMC is backed by diversified financial services firm and market men believe it would be easier for it to attract investors as it already has an existing brand.
The mutual fund space is going to witness an explosive growth and the size of the industry could grow exponentially over the next 5-10 years due to the demographic profile.
MFs are a safer bet in choppy market:
Turbulent markets are always a matter of panic for retail investors. Continuing volatility and short-term bearish outlook have led to severe bloodbath on Indian bourses in recent times. Due to the global crisis, it is difficult to take a short-term call on the Indian markets, but in the long-term, one remains positive.
There is no significant change in the fundamentals of Indian economy. If the economy is believed to grow at 7.5-8%, then there is no reason why an investor should not enter the market below 16,000 at these levels.
The current valuation is an opportunity for long-term investors to park their money in equity-oriented mutual funds (MFs) at lower NAVs. Many investors who had bet their money directly in equities had suffered in the recent turmoil. Many stocks which were trading at all-time highs have now tumbled to their 52-week lows in the current collapse.
During the time of such crisis, one often realizes the advantage of investing in MFs over direct equity. Following are some reasons why one would want to invest in an MF in the current conditions.
MFs invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because all the stocks do not decline at the same time and in the same proportion. This diversification through an MF is achieved with far less money than one can be on his own.
Top-performing MF schemes have produced good returns, which a naive investor rarely achieves in course of direct stock-market trading. Not everyone has the skill, knowledge and time to plan his/her investments. The easier way out is to select the right MF and transfer the entire responsibility of managing the money to the fund manager. Thus they can avail of services of experienced and skilled professionals who are backed by a dedicated investment research team.
Today, MFs provide an attractive and simple way of tapping the potential of various investment options like equity, debt and money market instruments. If you are unsure about the equity markets this year, you can simply move to a debt fund or an MIP.
Indian markets have the potential over the long run, while it might not be a good bet for the short term. There are chances of continued volatility. It is advisable to spread out the investments rather than lump-sum ones. Here again, the MF proves to be beneficial since they provide features like systematic investment/transfer plans. Investment at regular intervals helps to average out the cost of purchase.
Equity MFs too have taken a hit in the recent stock market collapse. Yet, in most cases, their losses have been less severe than some of the single stock collapses (especially mid-cap ones). And for investors who had been investing through the systematic investment route for the past one year, they have actually earned positive returns despite the recent collapse.
Also, the right time to start tax planning for the year is now. When the markets are falling, one should grab the opportunity to invest in ELSS schemes (tax-saving mutual funds) rather than waiting for the end of the fiscal.
Although investment risk and economic uncertainties can never be eliminated, MFs have been able to ensure that investors in different segments, achieve their investment objective.