Mutual Fund CEOs: Investors Need Suitable Products, Not Complexity

SIP Growth Puts Investor Fit at the Centre of Mutual Fund Strategy

Fund leaders see a larger opportunity in widening participation—but say simpler choices and disciplined risk management matter as much as new products.

SIPs are widening the industry’s reach

At the Business Standard BFSI Insight Summit in Mumbai, leaders from four asset managers described a sector whose growth depends not only on attracting more money, but also on reaching more investors. Nippon India Mutual Fund chief Sundeep Sikka said the industry should focus more on the number of people investing than on assets under management, with fund houses and the Association of Mutual Funds in India working to extend awareness beyond major cities.

Sikka said monthly SIP contributions had risen from less than ₹3,000 crore a decade ago to around ₹30,000-32,000 crore. That growth reflects the appeal of a regular investing route for households, but the executives’ emphasis was on making participation sustainable: investors need products they understand and can stay invested in through market swings.

Smallcap opportunity comes with a wider range of outcomes

DSP Mutual Fund chief Kalpen Parekh said investors with a 10- or 20-year horizon should not make decisions solely on current valuations, while acknowledging that smallcap and midcap shares had run ahead of fair values in recent years. He also highlighted how sharply outcomes can differ within these segments: smallcap and midcap fund NAVs were 4-5% below their peaks, while some individual smallcap and microcap portfolios had fallen 30-40%.

The distinction matters for investors tempted to treat a market-cap category or index performance as a guide to every holding. Parekh said fund houses had previously restricted or slowed lump-sum smallcap investments as valuations rose, with some steering investors towards SIPs. For those who cannot tolerate sharp volatility, he pointed to hybrid, multi-asset and flexicap funds as possible starting points; smallcap investors, he said, should assess fund-manager experience and risk controls rather than chase past returns.

Product innovation must solve a specific need

Edelweiss Mutual Fund chief Radhika Gupta argued that innovation should make investing more accessible, not more complicated. She cited SIPs as a structured way for salaried investors to save and invest, and gold ETFs as a financial-market route to gold exposure without buying the physical asset. Her broader point was that a product’s value depends on whether it addresses an investor’s objective—not simply on its novelty or popularity.

ICICI Prudential AMC chief Nimesh Shah made a related case for broad-based flexicap, largecap and midcap schemes, which allow fund managers to adjust allocations as valuations change. He also cited hybrid funds as a way to combine equity and debt exposure, with equity allocations able to shift with market conditions. These approaches may reduce the need for investors to make concentrated calls on a single segment, though they do not remove investment risk.

SIF flexibility and AI bring new questions

Specialised investment funds (SIFs) could broaden the strategies available to investors, but executives stressed that greater flexibility—particularly in the use of derivatives—requires strong risk management. Parekh said DSP was taking a cautious approach and building expertise in long-short strategies rather than learning at investors’ expense. Sikka said Nippon India Mutual Fund planned an SIF offering under the Endurance brand, with two products expected.

The discussion also touched on artificial intelligence. Sikka said AI could help fund managers research companies and process information as more businesses enter the listed market, but did not expect it to replace human judgement. For investors, the takeaway is that new tools and strategies may change how funds are managed; they do not by themselves establish that a product is suitable.

Key Highlights

• SIP contributions have grown from less than ₹3,000 crore to around ₹30,000-32,000 crore a month over a decade, according to Sikka.
• Fund leaders want the industry to measure progress by the number of investors as well as assets under management.
• Executives cautioned that smallcap and midcap investing can involve substantial volatility and widely differing portfolio outcomes.
• Hybrid, multi-asset and flexicap schemes were cited as options for investors seeking broader exposure or a less concentrated approach.
• SIFs may add strategy choices, but their flexibility makes risk controls and investor suitability especially important.

Investor Note: The industry’s expanding product range does not make every fund appropriate for every investor. Match a scheme to your time horizon, comfort with losses and financial needs, and assess its risks and strategy rather than choosing on recent performance or novelty alone.