ASSET MANAGEMENT IN INDIA 2017 Targeting the Next Growth Phase Overview & Methodology This new country-focused report examines the opportunities and challenges for asset managers in the rapidly growing Indian market amid regulatory developments on a fee-based advisory model and focus on digital modes of distribution. Data comes from proprietary surveys of managers and retail investors. Qualitative insights are gained from interviews with regulator, large- and mid-sized managers, distributors, and industry associations. Benefits: y Covers the Indian asset management industry in terms of AUM growth drivers and distribution landscape y Reviews the regulatory developments toward adopting distribution and advice-based models y Examines investors digital needs and managers plans for digitalization y Explores investor sentiments and factors influencing investors mutual fund buying decisions y Compares the profitability of domestic, global, and joint venture firms in the Indian market Questions Answered: SUBSCRIPTION DETAILS $19,000 PURCHASE INCLUDES y Digital copy and hardcopy in color y Unlimited online firm-wide access y Exhibits in Excel y Key findings y Analyst support y Interactive Report Dashboards NEW y Executive Summary Video NEW For more information, contact us: ``info@cerulli.com ANNUAL 150 PAGES 110 EXHIBITS y What are the opportunities and challenges for managers tapping the growing Indian market? y How is the market gradually transitioning from basic to complex products to meet the diverse needs of customers? y What could be the impact of the evolving regulations on the Indian industry? y How will the digital landscape evolve and impact fund distribution? y What do managers need to consider in order to build a long-term sustainable and profitable business in India? Cerulli Interactive Report Dashboards NEW Experience Cerulli s digital analytics platform and explore interactive data from this report We are pleased to include these interactive report dashboards with your subscription: 1. Mutual Fund Industry Overview: Understand the size of the mutual fund industry, including assets and net new flows by investment objective. 2. Investor Sentiment and Product Landscape: Analyze asset managers product promotion plans across various fund categories to distributors and retail investors, and map them against responses from Cerulli s survey of retail investors about their intended fund investment decisions. 3. Regulation and Digitalization: Assess the impact of commission disclosures from both investors and managers perspectives, along with investors sentiments about advisory models and managers preferred approaches to implementing the model. Gain insights into investors digital needs and managers digitalization plans. CERULLI ASSOCIATES info@cerulli.com www.cerulli.com
What are Interactive Report Dashboards? As part of your Cerulli report subscription, we are pleased to provide you with Interactive Report Dashboards that allow you to interact with report data in unique ways: ACCESS Access consolidated data from multiple report exhibits in a single comparative view. FILTER DATA Apply filters to Cerulli report analyses including assets under management, net new flows, product type, channel, year, marketplace, and currency. EXPORT Easily build and export custom charts. Export options include; Excel, PDF, or image file. My Account: Joe Q. Sample How to Access Interactive Report Dashboards This service is complimentary and is accessible through our website. Use your unqiue Cerulli website login credentials, and you will find a View Interactive Report Dashboards link to this platform under My Reports. Interact View Dashboard You can also jump to related Interactive Report Dashboards in the report PDF by clicking on the Interact button shown on the left for reference. USER LOGIN To obtain online access, please visit www.cerulli.com or contact our account management team at: ``info@cerulli.com ` `+1 617-437-0084 CERULLI ASSOCIATES info@cerulli.com www.cerulli.com
Chapter 1 Overview Exhibit 1.07 Indian Managers Views on the Macroeconomic Events That Could Impact Their Business Managers see demonetization as having some adverse impact on economic growth and corporate earnings. Source: Cerulli Associates Demonetization impact on economic growth, corporate earnings 5.9 U.S. interest rate hike Uncertainity over government's reform policies (e.g., GST) 5.5 5.4 Fluctuating oil, commodities prices 4.9 Possible U.S. policy changes 4.6 Weak investor sentiment 3.8 Uncertainty in Europe Geopolitical turbulence in Asia 2.3 2.5 1 2 3 4 5 6 7 8 Least impact Greatest impact Meanwhile, the government s economic survey released in August 2017 has flagged potential obstacles in meeting the higher end of the 6.75% to 7.5% economic growth projected earlier for the current financial year that ends in March 2018. The survey said key factors that could dent economic growth are farm loan waivers and the transitional impact of the GST reform, as noted above. The survey also said that there is considerable room for the central bank to cut interest rates further. In early August, the Indian central bank slashed the repo rate by 25 basis points to 6%. While the RBI has been reducing key rates, the government has also been gradually lowering the rate of interest offered on small-savings schemes in order to align these with market rates. The gradually declining interest rate in the government s small-savings instruments, along with the easing monetary policy of the RBI, could help the industry move investors toward mutual funds. The industry can promote ELSS, which have relatively lower lock-in periods than some small-savings schemes, and which offer tax benefits, to attract these investors. 28 The Cerulli Report Asset Management in India 2017
Index of Exhibits Index of Exhibits Methodology... 12 Exhibit M.01 Cerulli s India Retail Investor Survey Sample by Wealth Tier....13 Key Questions Answered... 16 Exhibit 2.08 Indian Managers Preferred Approach for Adopting the Advisory-Based Model, 2017...16 Exhibit 5.04 Indian Asset Managers Views on Specific Fund Strategies They Will Promote to Various Client Segments, 2017...17 Exhibit 3.03 Indian Managers Views on the Digital Channel That Could Emerge as the Most Preferred for Transactions, 2017...18 Exhibit 6.04 Indian Mutual Fund Managers Operating Revenues and Operating Expenses, FY2014 FY2016...19 Exchange Rates.... 20 Exchange Rates...20 Chapter 1: Overview... 21 Exhibit 1.01 Indian Mutual Fund Assets Under Management, 2012 June 2017....22 Exhibit 1.02 Indian Mutual Fund Net New Flows by Investment Objective, 2012 June 2017 YTD....23 Exhibit 1.03 Indian Mutual Fund Assets Under Management by Investment Objective, 2012 June 2017...24 Exhibit 1.04 Inflows Gathered Through Systematic Investment Plans, FY2016 and April July 2017....25 Exhibit 1.05 Mutual Fund Holding Period of Investors, June 2017...26 Exhibit 1.06 Indian Managers Views on the Impact of the Government s Demonetization Initiative on Their Business.................................................................. 27 Exhibit 1.07 Indian Managers Views on the Macroeconomic Events That Could Impact Their Business...28 Exhibit 1.08 Interest Rates on Small-Savings Schemes...29 Exhibit 1.09 Key Policy Rates of The Reserve Bank of India....29 Exhibit 1.10 Indian Mutual Fund Assets Under Management by Investor Type, June 2015 June 2017...30 Exhibit 1.11 Indian Mutual Fund Assets Under Management by Investor Type, September 2013 June 2017...31 Exhibit 1.12 Geographical Breakdown of Assets Under Management, June 2017....32 Exhibit 1.13 Largest 10 Indian Mutual Fund Managers, 2015 June 2017...34 Exhibit 1.14 Assets Under Management of Indian Managers with Foreign Ownership, 2015 June 2017...35 Exhibit 1.15 Indian Asset Management Marketplace Overview...38 Exhibit 1.16 State-Wise Distribution of Average Assets Under Management Across Various Fund Categories, June 2017...39 Exhibit 1.17 Detailed Breakdown of Indian Mutual Fund Assets Under Management by Investor Type, June 2017...40 Exhibit 1.18 Detailed Breakdown of Accounts by Investor Type, June 2017...41 Chapter 2: Evolving Regulations: Moving Toward the Advisory Model............. 42 Exhibit 2.01 Timeline of Key Regulatory Initiatives on Fund Distribution, Advisory Practices, Enhanced Disclosures, and Investor Empowerment....44 Exhibit 2.02 Indian Managers Biggest Concerns for India s Retail Business, 2017....46 Exhibit 2.03 Indian Managers Views on the Impact of Commission Disclosures in Investors Statements of Account, 2017...47 Exhibit 2.04 Indian Survey Respondents Sentiments on Commission Disclosures in Statements of Account, 2017...47 The Cerulli Report Asset Management in India 2017 7
Index of Exhibits Exhibit 2.05 Asia ex-japan Investors Fees Paid to Their Advisors, 2016....48 Exhibit 2.06 Asia ex-japan Investors Willingness to Pay for Advice, 2016...49 Exhibit 2.07 Asia ex-japan Investors Preferred Mode of Compensating Their Primary Providers, 2016...49 Exhibit 2.08 Indian Managers Preferred Approach for Adopting the Advisory-Based Model, 2017...50 Exhibit 2.09 Indian Survey Respondents on Their Usage of Financial Advisors, 2017...51 Exhibit 2.10 Indian Survey Respondents on Their Most Relied Upon Channel for Investment Decisions, 2017...51 Exhibit 2.11 Indian Survey Respondents on Whether They Are Aware of Any Norms on the Fee-Based Advice Model, 2017...52 Exhibit 2.12 Indian Survey Respondents Sentiments on the Proposed Fee-Based Model, 2017...52 Exhibit 2.13 Indian Survey Respondents on Their Preferred Mode of Compensating Providers, 2017....53 Exhibit 2.14 Indian Managers Views on the Impact on Distribution Channels if the Advisory-Based Model Is Adopted...54 Exhibit 2.15 Indian Managers Views on the Impact of Likely Adoption of Advisory-Based Model on Independent Financial Advisors..................................................... 54 Exhibit 2.16 Indian Asset Manager Survey Respondents Views on Distribution Channels They Intend to Expand Their Use of This Year, 2017...55 Exhibit 2.17 Indian Asset Manager Survey Responses on Their Top Distribution Partners....56 Exhibit 2.18 Top Wealth Managers Among Indian Investors, 2016...56 Exhibit 2.19 Top Indian Distributors by Average Assets Under Management, FY2016 FY2017....57 Exhibit 2.20 Top Indian Distributors by Commissions, FY2016 FY2017...57 Chapter 3: Taking the Digital Route to Enhance Reach... 58 Exhibit 3.01 Indian Investors Extent of All Wealth Management Engagement Through Digital Channels, 2016...60 Exhibit 3.02 Indian Investors Touchpoints With Financial Advisors Through Various Modes, 2017....60 Exhibit 3.03 Indian Managers Views on the Digital Channel That Could Emerge as the Most Preferred for Transactions, 2017....62 Exhibit 3.04 Selected Robo-Advisory Services in India, 2017...64 Exhibit 3.05 Snapshot of Services Offered by Selected Robo-Advisors in India...65 Exhibit 3.06 Snapshot of Robo-Advisory Services Poll Among Indian Survey Respondents, 2016...66 Exhibit 3.07 Preference for Human Advisors vs. Using Online Channels Among Asia ex-japan Investors, 2016....67 Exhibit 3.08 Indian Managers Digitalization Plans for 2017....69 Exhibit 3.09 Indian Managers Marketing Budget Allocation, 2017...70 Exhibit 3.10 Indian Managers Preferred Digital Media Platforms for Marketing Budget Allocation, 2017..70 Exhibit 3.11 Indian Managers Views on Percentage of Sales Coming Through Digital Modes, 2017...71 Exhibit 3.12 Indian Investors Touchpoints With Financial Advisors Through Various Modes by Wealth Tier and Age Group, 2017...72 Exhibit 3.13 Sampling of Fee and Commission Disclosures for Select Robo-Advisors...74 Chapter 4: Investor Sentiment and Behavior Study... 76 Exhibit 4.01 Survey Respondents Household Financial Holdings by Asset Class...77 Exhibit 4.02 Survey Respondents Key Objectives for Investing in Mutual Funds...78 Exhibit 4.03 Survey Respondents Key Reasons for Investing in Exchange-Traded Funds....80 Exhibit 4.04 Survey Respondents Reasons for Not Investing in Exchange-Traded Funds...80 Exhibit 4.05 Survey Respondents Attitudes Toward Risk by Wealth Tier and Age Group...81 Exhibit 4.06 Survey Respondents Expected Returns from Mutual Funds by Wealth Tier...82 Exhibit 4.07 Extent of Losses Acceptable to Survey Respondents by Wealth Tier...83 8 The Cerulli Report Asset Management in India 2017
Index of Exhibits Exhibit 4.08 Most Important Factors That Influence Survey Respondents When Investing in Mutual Funds....84 Exhibit 4.09 Most Important Product Features That Survey Respondents Look for When Investing in Mutual Funds by Wealth Tier...86 Exhibit 4.10 Survey Respondents Key Sources of Information for Mutual Funds...87 Exhibit 4.11 Survey Respondents Average Mutual Fund Holding Period by Type....88 Exhibit 4.12 Survey Respondents Key Reasons for Investing Through Online or Mobile Channels...88 Exhibit 4.13 Locations Where Survey Respondents Have Seen Mutual Funds Advertisements...89 Exhibit 4.14 Investments That Survey Respondents Are Considering Over the Next 12 Months...90 Exhibit 4.15 Broad Mutual Fund Categories That Investors Are Looking to Invest in Over the Next 12 Months...91 Exhibit 4.16 Specific Mutual Fund Products That Investors Are Looking to Invest in Over the Next 12 Months...91 Exhibit 4.17 Survey Respondents on Their Preferred Indian Managers...92 Chapter 5: Product Landscape and Wealth Management Trends... 94 Exhibit 5.01 Indian Asset Managers Biggest Challenges When Promoting Their Funds to Fund Selectors....96 Exhibit 5.02 Snapshot of Number of Funds by Product Category, December 2013 June 2017...97 Exhibit 5.03 Indian Asset Managers Views on Broad Fund Strategies They Will Launch or Promote to Distributors, 2017...98 Exhibit 5.04 Indian Asset Managers Views on Broad Fund Strategies They Will Promote to Various Client Segments, 2017...98 Exhibit 5.05 Indian Asset Managers Views on Specific Fund Strategies They Will Launch or Promote to Distributors, 2017...99 Exhibit 5.06 Assets Under Management in Exchange-Traded Funds and Fund-of-Funds Products, 2012 June 2017...100 Exhibit 5.07 Assets Under Management in Overseas Fund-of-Funds Products, 2012 June 2017...101 Exhibit 5.08 Top Global Funds of Funds, June 2016...101 Exhibit 5.09 Commitments and Funds Raised by Alternative Investment Funds in India, December 2012 March 2017....104 Exhibit 5.10 Indian Asset Managers Views on Their Operational Capability to Launch Alternative Strategies, 2017...105 Exhibit 5.11 Assets Under Management by Portfolio Manager Type, March 2013 March 2017....107 Exhibit 5.12 Number of Clients by Portfolio Manager Type, March 2013 March 2017....107 Exhibit 5.13 Breakdown of Assets Under Management by Investment Categories for Discretionary and Non-Discretionary Portfolio Managers, December 2016 March 2017....107 Exhibit 5.14 Survey Respondents Preferred Type of Portfolio Manager, 2017...108 Exhibit 5.15 Survey Respondents Key Reasons for Using Portfolio Management Services...109 Exhibit 5.16 Salient Requirements for Infrastructure Investment Trusts and Real Estate Investment Trusts...111 Chapter 6: Profitability Review of Asset Managers in India... 112 Exhibit 6.01 Indian Mutual Fund Managers Classified by Ownership, FY2016...114 Exhibit 6.02 Largest 10 Indian Mutual Fund Managers, FY2014 FY2016...116 Exhibit 6.03 Indian Mutual Fund Managers Average Assets Under Management by Firm Classification, FY2014 FY2016...117 Exhibit 6.04 Indian Mutual Fund Managers Operating Revenues and Operating Expenses, FY2014 FY2016...118 The Cerulli Report Asset Management in India 2017 9
Index of Exhibits Exhibit 6.05 Indian Mutual Fund Managers Operating Revenues and Operating Expenses by Firm Classification, FY2014 FY2016...119 Exhibit 6.06 Indian Mutual Fund Managers Operating Profit Margin by Firm Classification, FY2014 FY2016...120 Exhibit 6.07 Indian Mutual Fund Managers Operating Revenues and Operating Expenses as a Percentage of Average Assets Under Management, FY2014 FY2016...122 Exhibit 6.08 Top 10 Indian Mutual Fund Managers by Operating Profit Margin, FY2014 FY2016....123 Exhibit 6.09 Top 10 Indian Managers by Operating Revenue as a Percentage of Average Assets Under Management, FY2014 FY2016....124 Exhibit 6.10 Top 10 Indian Managers by Operating Expenses as a Percentage of Average Assets Under Management, FY2014 FY2016...125 Chapter 7: Institutional Developments... 128 Exhibit 7.01 Investment Stipulations of the Employees Provident Fund Organization...129 Exhibit 7.02 Investable Assets of the Employees Provident Fund....130 Exhibit 7.03 Asset Allocation of Exempted Schemes of the Employees Provident Fund Organization, 2011 2015....130 Exhibit 7.04 List of Managers Managing the Employees Provident Fund Organization s Assets Under Portfolio Management Services...133 Exhibit 7.05 Performance of Managers Managing Employees Provident Fund Organization Assets, FY2015....133 Exhibit 7.06 Assets Under Management of the National Pension System and Atal Pension Yojana, March 2013 June 2017....135 Exhibit 7.07 Assets Under Management of the National Pension System by Manager, March 2013 June 2017....136 Exhibit 7.08 Investment Stipulations for the National Pension System and Other Pension Funds...137 Exhibit 7.09 Investment Allocation of the National Pension System, March 2015 March 2016...137 Chapter 8: Fund Passporting... 138 Exhibit 8.01 Mutual Funds Approved Under the ASEAN Collective Investment Scheme, April 2017...139 Exhibit 8.02 Southeast Asian Asset Managers Views on the ASEAN Collective Investment Scheme, 2017...139 Exhibit 8.03 Managers Views on Whether the Indian Market is Ready for Fund Passporting...141 Exhibit 8.04 Indian Managers Views on Likely Advantages of Potential Fund Passporting....141 Exhibit 8.05 List of Indian Managers With Offshore Products...142 Exhibit 8.06 Indian Survey Respondents Willingness to Invest in Overseas Markets, 2017...143 Exhibit 8.07 Indian Survey Respondents on Concentration of Overseas Funds, 2017....144 Exhibit 8.08 Indian Managers Likely Concerns in Implementing Potential Fund Passporting...145 Glossary.... 146 Index of Companies... 149 10 The Cerulli Report Asset Management in India 2017
Company Index Company Index Altamount...106 Amundi...102 ASK Group...105 Axis Asset Management...123 BlackRock...69 Blackstone Group...111 BNP Paribas Asset Management...120, 123, 125 BNP Paribas Wealth Management...143 Brookfield Asset Management...111 Client Associates...106 Coal Mines Provident Fund Organisation...134 Credit Suisse... 103, 143 CRISIL...128, 132, 133 Dai-ichi Life Insurance Company...36 Deutsche Asset Management...113 Deutsche Bank...117 DSP BlackRock Mutual... 32, 33, 63, 79, 105, 110 Edelweiss Asset Management...32, 63, 79, 102, 105 Embassy Group...111 Essel Finance...33 Fidelity... 69, 113 Franklin Templeton Asset Management...21, 36, 63, 113, 115 FundsIndia... 32, 79 GIC...11 Goldman Sachs Asset Management...113 HDFC Bank... 27, 117 HDFC Mutual... 63, 105 HSBC Asset Management... 117, 120, 123, 125, 126 ICICI Bank... 27, 117 ICICI Prudential Mutual... 102, 105 ICICI Securities Primary Dealership...134 IDFC Mutual... 33, 105 IIFL... 105, 122 IIFL Asset Management...122 IIFL Wealth Management...123 IL&FS Infra Asset Management...122 India Infoline...123 Indiabulls...105 Invesco... 36, 113 J.P. Morgan Asset Management...113, 115, 117 Julius Baer...143 Karvy PMS...108 KBC Asset Management... 36, 113 Kotak Mahindra Mutual...21, 36, 63, 102 The Cerulli Report Asset Mangement in India 2017 149
Company Index Legg Mason...69 Mahindra Mutual...21, 34, 126, 127 Mirae Asset Global Investments...113 Morgan Stanley...113 Motilal Oswal Asset Management...105 Motilal Oswal Securities...63 Nippon Life Asset Management... 36, 113 Nomura...113 Nordea...102 Peerless Mutual...33 PineBridge...113 Pramerica Asset Management... 115, 117 Reliance Nippon Mutual... 102, 105 Religare Enterprises... 36, 113 Samsung Asset Management...102 SBI Mutual... 78, 102, 110, 129, 131 Schroders... 69, 102 Scient Capital...108 State Bank of India...27 Tata Mutual... 36, 127 Trivantage Capital...108 Trust Capital...108 Union Bank of India...36 UTI Mutual... 105, 131 Value Partners...69 Waterfield Advisors...106 Yes Bank...33 150 The Cerulli Report Asset Management in India 2017