Reliance Mutual bets big on retail investorsOctober 2nd, 2011 - 2:50 pm ICT by IANS
Phuket (Thailand), Oct 2 (IANS) In a multi-pronged strategy, India’s biggest mutual fund company Reliance Capital Asset Management Ltd (RCAM) is now focusing on growing its retail business rather than focusing on asset under management (AUM) through institutional investors, said a top company official here.
“Our focus is clearly on the retail as the untapped potential is very large. It is retail that would grow the business in a steady manner than the institutional business,” Sundeep Sikka, president and CEO of the company, told reporters here.
RCAM’s multi-pronged approach involves bringing in innovative products, increasing the number of advisors, growing its retail reach by opening new branches and extensive use of technology.
As part of its retail thrust, RCAM has set its eyes on the savings bank account holders with sizeable sums idling in their bank accounts.
“We will be launching a product - Reliance Any Time Money - that would facilitate an investor to use his liquid fund like a savings bank account with ATM card facility. We feel offering liquid and debt schemes to investors as the way to go retail and later offer them equity schemes,” said Amitabh Mohanty, head of fixed income.
“A prospective investor has to give a mandate to his banker to transfer a specified sum every month to his Reliance liquid fund account. Once this is done, he can use the Visa ATM card given by us free of cost like a normal bank debit card. He can make his purchases using our card or withdraw money from ATMs,” Deputy CEO Himanshu Vyapak said.
RCAM expects to beef up its retail base with this scheme offering the convenience of a saving bank account with far higher returns for an investor than a bank’s short-term fixed deposits.
Sikka said the company has launched the product on pilot basis among 5,000 people and soon the commercial launch would happen.
India is predominantly a fixed income country and the mutual fund industry has just started scratching the surface.
“Around Rs.52 lakh crore has been mobilised from fixed deposits, whereas the mutual funds have mobilised only Rs.5 lakh crore with their debt schemes. A lot of the fixed deposit schemes are sold without any push,” Mohanty said.
The company is also offering free life insurance for the investors in 17 of its systematic investment plans (SIP).
“India has around 320 million wage earners and only around 6.74 million are mutual fund investors. In five years time, the household savings will be more than the current Gross Domestic Product (GDP). Now only two percent of the household savings come to the mutual fund,” Sikka remarked.
He said the size of the Indian mutual fund industry is around Rs.700,000 crore (equity schemes Rs.200,000 crore, debt Rs.500,000 crore). Out of the total debt schemes, the retail sector contributes Rs.150,000 crore and the institutional segment Rs.350,000 crore.
“The institutional funds are unpredictable and not stable. For instance, after the RBI’s (Reserve Bank of India) directive that banks cannot invest over 10 percent of their net worth in mutual funds, the available pie for our industry is only Rs.40,000 crore. But the retail accounts are stable,” he added.
RCAM gets around Rs.5,000 crore per year from its various SIP schemes which works out to a commitment of around Rs.25,000 crore over a five year period by the investors to the fund house.
On expanding RCAM’s retail reach, Sikka said: “We will open around 50 new branches every year. We have 270 branches now. We will increase the number of advisors to 100,000 in two-three years.”
Declining to give an investment figure, Sikka said the company has been investing in technology to reach out to the retail investors.
Apart from its advisors and branches, RCAM facilitates retail investments through call centres, mobile phones and social networking sites like Facebook.
(V. Jagannathan can be contacted at firstname.lastname@example.org)
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