Analysts at the brokerage house have examined the growth seen in MF AUM in other markets, both developed and emerging, after they touched a similar penetration level, i.e. of 10-12% AUM / GDP. Most countries saw >15% AUM CAGR over the next 10 years, 2-4x of the CAGR observed in nominal GDP.
For example Australia saw its AUM grow by 36% CAGR from 1996-2006, South Africa by 24% and Malaysia by 19% from 2000-2010 and USA by 20% from 1990-2000.
Assets under management of the mutual fund industry have seen a 14% CAGR over 10 years to Mar ’20 and penetration as a % of GDP has risen gradually to 10.9%. The brokerage house believes the recent market correction in Mar ’20 understates these – as on Mar ’19, the 10Y CAGR was 19% and penetration 12.5%. By either measure, India is significantly below the global average of 63% and also below several EM countries.
They point out that currently less than 2% Indians invest in mutual funds. MFs are just 3% of gross household financial savings and are gaining share from bank deposits. SIPs have been a great innovation with flows holding up well in high volatility and reflect rising investor awareness.