You got it wrong if you thought we are talking about some photograph posted on a social networking website. Here, we are in fact referring to results of a survey which we conducted recently. We had asked our readers whom would they rate as India's most trusted mutual fund house. Survey was conducted on a sample set of 1,450 people, of which nearly 32% respondents rated HDFC Mutual Fund as India's most trusted mutual fund. Interestingly, Quantum Mutual Fund appeared 2nd from the top with 16% of people taking survey thought Quantum Mutual Fund is the most trusted fund house. We have called HDFC Mutual Fund an Elephant considering its Assets under Management (AUM) being the largest as far as equity oriented assets are concerned. On the other hand, Quantum Mutual Fund is one of the tiniest fund houses on this parameter thus has been compared to Ants. As per the latest disclosers as on February 28, 2013, HDFC Mutual Fund has been managing assets worth Rs 39,431 crore under its open ended equity oriented funds while Quantum Mutual Fund has assets only worth Rs 173 Crore under its under its equity oriented funds.
Survey Result at glance
While more and more new companies are entering into asset management business these days; even some established fund houses have not been rated as high as one would imagine them to be when it comes to trust.
How People have Rated Fund Houses to be India's most trusted ones?
Sample Size: 1,452;
(Source: Poll Conducted by Personalfn.com)
The fund house which tops the list has received as many as 4 times the votes received by the fund house that stands 3rd. This is a stark difference and shows many players in the industry have lagged far behind the others in winning peoples' trust. There's only a fund house in the list of top 10 which has a record of less than 10 years in the Indian Mutual Fund Industry.
What may have influenced the opinion of respondents?
If one believes that trust is a function of longevity then even some older fund houses have scored lower than relatively new ones. Moreover, those who think that trust can be developed only by generating high returns for investors may not be completely right. Some fund houses, despite having generated excellent returns under few of their schemes, have been rated low as per our survey. We believe it's a combination of various factors that may have affected the vote count.
First among them may very well be the Popularity of funds under management. These days, it is not uncommon to get to read recommendation reports on mutual fund schemes. A whole host of personal finance websites, daily circulations and independent research houses put forward their views, bullish and bearish both. These are primarily based on the performance of these funds across various time periods. As a result most of the times the same funds get highlighted from all around, only sources change. And yes, to add to this, these funds as well as people running them win awards which also earn more reputation to fund houses.
Performance of some Popular Funds
(* Rolling CAGR Returns)
(Source: ACE MF, PersonalFN research)
It is said that the on-going corrective phase of the market has started in November 2010. Table above tells you how AUM of some funds enjoying star ratings has gone up during the corrective phase. AUM may go up without any significant additional contribution by investors if markets are constantly rising. But in this case markets have gone nowhere and still AUM has gone up sharply. Awareness creates familiarity which may result in positivity and eventually leads to development of trust. This is not to say that it can't be illusionary.
The other major reason that may influence the voters is their personal experience. Those who have benefited by investing in various schemes offered by the same fund house may naturally develop trust in that fund house. On the other hand, those who have lost money, not necessarily because of any fault on account of poor fund management, but due to bad market conditions, may still mistrust the fund house.
In Our Opinion
What you have read just now is merely a result of a poll conducted by us. The pole result may not be depicting the true picture. Therefore we urge you not to form any opinion about fund houses based on our findings. However we believe, in fund management, accountability helps build trust. Not launching too many schemes when it would be easily possible given the popularity of the brand, may demonstrate accountability of the fund house towards its existing investors. Treating all funds at par (caring about the performance of all) and not just focusing on funds which are "scalable" because they are easily salable due to their past performance is also a sign of being accountable to all investors.
Retail participation in equity markets is falling. Equity oriented funds are facing redemption pressures. People have perceived any rise in market indices as an opportunity to exit (even by booking losses). As per data released by Association of Mutual Funds in India (AMFI) in September 2012, there are only 3.75 crore folios in equity oriented funds (including balanced funds). Should this number improve, along with markets, accountability of fund houses must go up and rather go up significantly.
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sharada.iriventi@gmail.com
Apr 14, 2013
A good and near to the truth analysis. The article could have shown the other side, i.e., the Fund houses standing in the bottom of the investors' trust. |
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