India’s Leading BFSI and FinTech Companies 2023

66 | India’s Leading BFSI and FinTech Companies 2023 [ INDIAN ASSET MANAGEMENT INDUSTRY OVERVIEW ] KEY CHALLENGES Customer awareness Most Indian households are risk- averse and are selective about where they want to invest their hard-earnedmoney. Such investors proceed with investing in tangible assets such as gold, jewellery, real estate or fixed deposits in banks. Unfortunately, investments in mutual funds are still considered to be a risky investment. To overcome these challenges, AMCs provide a vast array of schemes, tailored to the investor’s level of risk tolerance, anticipated returns, and time horizon for investing. Lowparticipation and penetration Low retail participation is the biggest chal lenge for Indian mutual fund industry. The top 30 cities still contribute 83% of total assets. Also, majority of AMCs focus on tapping institutional and HNI monies to achieve their target. The reach of AMCs is limited to Tier – 2 and 3 cities which acts as hurdle to convince participation from hinterlands. Distributional efficiency AMCs have to incur a huge amount of expenditure on distribution and market ing for gather ing i nves tment s i n h i nter l ands . Enhancing the efficiency of the distributional channels will always remain a hurdle with respect to attracting new investors in small cities of the country. OUTLOOK Aspect s such as ignorance, risk-aversion and mutual fund complexity will continue to be hurdles that AMCs in India will have to overcome, to increase the retail participation in mutual funds. The fact cannot be ignored that investors are required to look beyond the traditional avenues of investment through education. Additionally, financial literacy and campaigns should be tailored and amplified to increase the visibility of other asset classes like debt, liquid, and ETFs Indi a i s amongs t those few countries where there is a special incent ive to sel l mutual fund products beyond the larger cities and also has a mandatory spend on investor education. High quality expansion of product sui tes, evolving regulations, increasing industry entrants, along with the rise of digital distribution channels will contribute towards a robust mutual fund investing ecosystem. With unprecedented challenges, as the country progresses towards becoming a $5-trillion economy by 2025, the asset management industry is expected to grow, expand its coverage and widen its investor base. Dun & Bradstr et