Investors give asset allocation a miss in Covid times: Cafemutual Survey

In a recent survey conducted by Cafemutual, 28% mutual fund distributors said most of their clients did not make changes to their investment portfolio to maintain asset allocation. Another 47% MFDs said that some of their clients chose not to maintain recommended allocation. Just 25% MFDs said their clients have rebalanced investment portfolio to maintain the pre-Covid-19 allocation.

The Covid-19 pandemic enforced loss of jobs and salary cuts have hit the continuation of SIPs adversely: around 62% MFDs saw some pause (58%) or widespread pause (4%) in SIPs.

Many investors also shifted from equity mutual funds to debt funds. 65% MFDs saw some (59%) or widespread (6%) shift in allocation from equity funds to fixed income funds. Similarly, 69% MFDs saw widespread (47%) or some (22%) shift in allocation from mutual funds to safer havens of bank deposits/cash.

The survey covered 1256 financial intermediaries, including mutual fund distributors and Registered Investment Advisers across 24 cities. While 861 respondents are from top 30 (T30) cities in the country, 395 intermediaries belong to beyond the top 30 cities (B30) cities. These distributors represent a cross-section of the MF industry.

Here are the key highlights.

Retirement is top priority for clients followed closely by children’s education/marriage

The other customer goals are (in this order): to protect themselves against an uncertain future, to fund the purchase of a house or car in future, to protect their wealth and to earn tax benefits.

Indian investors risk averse across age groups, feel MFDs. Even among millennials, just 39% of investors are seen as aggressive.

Investors are mature now

If the markets were to fall by 25% or more, 31% of MFDs were confident that there would be very few redemptions; in fact, another 28% of MFDs were confident that they would take advantage of the dip to buy more. A further 31% felt that investors would continue with SIPs though lump sum investments would dry up.

What is the criteria in brand selection?

Investors give maximum weightage to reputation of the AMCs to invest in mutual fund followed by name of fund manager, past track record of the scheme and uniqueness of the theme or investment strategy of the fund house.

However, six out of ten investors rely primarily on distributors to select funds.

Deterrents to investing in mutual funds

Poor perception, low awareness, and complexity of mutual funds are constraining the growth of the mutual fund industry.

• Many investors have a poor perception of mutual funds, say 58% of the MFDs

• There is a lack of awareness of mutual fund as an investment category among many investors, say 50% of MFDs.

• The study finds that 48% of MFDs believe that many investors feel mutual funds are too complex and difficult to understand.

However, the silver lining is that once they invest, investors have a positive experience with mutual funds – only 22% of MFDs feel that many investors have had a poor past experience with MFs.

“While the Mutual Funds Sahi Hai campaign has worked for the industry, (these scores are much better than those in our previous studies done 2& 4 years ago), there is still a lot of ground to be covered if the industry has to reach its true potential and reach every household in the country,” said Prem Khatri, Founder & CEO of Cafemutual.


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