The emergence of Smart-Beta ETFs and innovative indices that track top performing sectors and companies is a sign of maturity among Indian investors
Through Chandresh Nigam
As we draw the curtains on another turbulent year, there is no doubt that we have witnessed accelerated change in the mutual fund industry. The regulator’s continued focus on investor awareness, changing business models and policies, renewed focus on customer experiences, increased emphasis on using technology solutions, etc., have played a role. decisive in the evolution of the mutual fund industry.
In 2021, not only did we see benchmarks (Sensex and Nifty) hit record highs, but we also saw retail investors join the equity cult and support the markets despite strong outflows from foreign institutions. Let’s try to take a look at some of the key learnings over the course of 2021.
Digital customer experience
As governments were forced to pass a second lockdown, businesses had no choice but to jump-start their full digital makeover. The existing structures had to be reorganized according to the new needs of the customers and the technological options available to achieve innovative solutions.
Today, the industry is preparing for well-developed digital channels. Most fund houses have dedicated teams that work solely to reinforce an experience-based culture for clients. More recent tools have been adopted for the benefit of distributors and ACIs so that the financial solution meets the needs and expectations of the user.
Passive investment strategies
In the new normal, the attitude of investors towards wealth creation has also changed. While actively managed funds will remain important, we are seeing a growing acceptance of passive investment strategies. While they represent only a small portion of mutual fund assets under management, features like low cost structure and product ease of understanding will make them a force to be reckoned with.
In fact, following strong investor demand and increased awareness initiatives by fund houses, several AMCs have launched several innovative passive products in India. The emergence of Smart-Beta ETFs and innovative indices that track top performing sectors and companies is a sign of maturity among Indian investors.
Building on the history of global growth
The post-pandemic era has opened up a world of possibilities for investors. With advancements in technology and digitization, an investor has access not only to Indian markets but also to global markets. Mutual funds offer a range of products that invest globally in emerging sectors such as electric vehicles, AI, renewable energy; opportunities which might not be available on Indian stock exchanges.
With the launch of various foreign funds of funds, not only is the mutual fund industry realigning itself to harness the power of global stature companies, but also aims to take advantage of the focus on emerging sectors that our investors might otherwise. do not have access to. The trip will now go from
“Risk-adjusted returns” to “risk-adjusted returns (overall)”.
Outlook for 2022
We are on the cusp of a long-term bull market driven by several favorable winds which we believe should propel India’s growth for decades to come. Our goal has always been to educate investors on building long-term sustainable investment portfolios. One of the key elements is the need to remain unperturbed during times of market turmoil. Over the past four to five years, as investors have participated en masse in mutual funds, they have increasingly understood the need for such long-term conviction.
The important fact that we bring home through all of our engagements both online and offline is our belief in the growth potential of the Indian economy and what it means for investors. So far the response has been positive. It is essential to examine not only the proverbial âdisruptorsâ, but also the companies that allow that disruption.
There is never a bad time to enter the markets. In addition, a correction (even minor) can be used to complete and reposition your portfolio in order to build up long-term wealth. Frequent corrections in a rising bull market are a sign of good health and, more importantly, an opportunity for wealth building. We believe investing well is half the job and staying invested for a long time is the other half that investors should give equal importance to in order to build wealth.
The author is Managing Director and CEO of Axis AMC
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