Nippon India’s BIG idea of the year is asset allocation. Multi asset funds have caught the imagination of investors globally, fueling the category to a 4-fold growth in the last decade. The benefits of diversification across less-correlated asset classes, reduced portfolio volatility and active participation in performing asset classes has been a big draw – and will continue to remain so.
Have Indian MFDs fully embraced asset allocation for their and their clients’ benefit? Not quite yet, says Saugata as he shows us data that reveals that MFDs’ AuM is around 70% equity (65% in equity funds, 15% in hybrids) and the rest largely in debt with a very small exposure to commodities. Interestingly, their investors perhaps have at least 70% or more in non-equity assets – a clear case of missed wallet share opportunities for MFDs.
The top 100 MFDs’ ticket sizes in hybrid funds are more than3x of their equity fund ticket sizes. That proportion rises to 4x for banks. Investors are willing to allocate more to hybrids due to their lower volatility and ability to capture most of market gains. MFDs who haven’t yet fully embraced hybrids are losing wallet share expansion opportunities.
Nippon India MF has a 4-lane highway in the hybrids arena, starting from a lower risk equity savings fund to the ever popular BAF to a fixed asset allocation multi asset fund that invests across domestic equity, international equity, debt and precious metals and finally a more evolved dynamic multi asset product – its Asset Allocation FoF. Saugata says there are options for all investor types and circumstances – no reason why MFDs should not be able to find a hybrid to suit every client.
There are many MFDs who love SIP drives. Maybe its time for lumpsum drives using hybrids of your choice.
Saugata believes if MFDs really want to grow their AuM rapidly through wallet share expansion, take on a target of achieving 20% of your book in hybrid funds. Start with new flows – ensure 20% of new flows go into hybrids. Use every portfolio rebalancing as an opportunity to increase hybrids exposure – it will be good for your clients and good for you.