85 Lakh New Millennials Invested in Mutual Funds during Past 5 Years; Prefer Equity Funds, SIPs: Report
Moneylife Digital Team 05 May 2023
The mutual fund (MF) industry witnessed a sharp increase in new investors starting FY19-20 due to five key drivers such as massive awareness campaigns, conducive market conditions, digital access, simplified know-your-customer (KYC) process and concerted intermediation and advisory. A staggering 8.48mn (million) new millennials joined the Indian MF industry, cornering 54% share of the new investor base, reveals a report.
The report titled "The emerging force of Millennial Investors is here to stay and grow" is prepared by Computer Age Management Services Ltd (CAMS) and the Confederation of Indian Industry (CII). The report was released during the 17th CII Mutual Fund Summit in Mumbai.
Talking about the report, Anuj Kumar, managing director (MD) of CAMS, says, "As we gave shape to the data, the insights brought out many pleasant surprises about the new millennials' participation in MFs and the opportunities this segment holds. The staggering asset under management (AUM) of Rs96,000 crore of the new millennials is a singular dimension that can sum up the potential of this generation. We believe they can take the industry to its next tipping point."
The study has been done for CAMS-serviced MFs, which have a market share of about 69% of the Indian MF industry. This includes 10 of the top-15 MFs. Millennials, also known as 'Gen Y', are typically defined as those born between 1981-1996.
In sharp contrast to the intuitive conclusion that millennials are likely to go the do-it-yourself (direct) way, the report says 95% of millennials have chosen advisers or distributors to begin their MF journey. "The relevance of intermediation and advice is very much intact."
"The acceleration of registered investment advisors (RIAs) to tap the millennial segment by providing slick, digital apps for seamless journeys has paid off. About 35% of the new millennials have been sourced by RIAs, and this has skewed the share of urban cities. Mutual fund distributors' (MFDs) performance in top (T)30 was punctuated during the pandemic, but they continue to champion the growth of mutual funds in both T30 and beyond (B)30 markets. Muted performance by private banks in the last five years with only 10% share is an area of opportunity," the report says.
According to the report, millennials have been the dominant segment among the new investors who entered MFs in the past five years, with their share percentage peaking at 57% in FY20. "The pandemic period stoked wider interest to help clock record high numbers with over 25 lakh millennials getting their first taste of CAMS serviced MFs in FY22. Despite the market volatility and uncertainty through FY22-23, investors' confidence to enter MFs remained sound, and millennials continued to make mutual funds their choice of investment for wealth creation."
According to the report, the progressive increase of women millennials, making up to 30% of new millennial investors in FY22-23, is an excellent sign of financial independence. The growing confidence of women to choose financial assets led to wealth creation, thus narrowing the gender divide in the traditionally male-dominated investment space.
Talking about asset class preferences, the report points out that equity MFs remain the top choice of millennials. "The choice of making the first investment in equity funds has heightened in FY21-22 and FY22-23, although the market rally peaked in FY20-21. A possible explanation is pandemic period could have kept the segment in a cautious mode, and the record performance of the market in FY20-21 may have stimulated millennials to enter in FY21-22, making an exuberant choice for equity." 
"Watching these new investors' behaviour over the next two years will show their stamina to stay invested in a flat market scenario. Making debt funds as the first choice to enter mutual funds holds promise to position debt schemes at appropriate times," the report says.
During the past five years, out of the 7.65mn millennials, nearly two-thirds (5.14mn lakh) started investing through systematic investment plans (SIPs), while the balance preferred lump-sum investment. Millennials have added 10.3mn SIPs during the five years in addition to the 5.1mn SIPs made as initial investments. These cumulative 15.4mn SIPs are 29% of the total 53mn SIPs registered across segments between FY18-19 and FY22-23.
While the mass of new millennial entrants has chosen the sub-Rs1,000 slab for their SIP commitment, the report shows that over 22% of the 5mn+ new entrants are in over Rs2,000 slab. 
However, over the years, investors who opted for the lump-sum route to commence their MF investment journey subsequently started an SIP.
A deep dive into the millennials' preference for SIPs brought unexpected and interesting insights. The 1.04mn millennials who began their journey in 2018-19 added 420K (thousand) SIPs in the same year and 2.12mn SIPs over the next four years. Cumulatively, 3.6mn SIPs have been added across the five years by these1.04mn millennials.
"Similar trends is seen from this community who have entered in the subsequent years as well. This points to a substantial and growing base of investors having a second or third SIP and some even having multiple SIPs," the report says.
Here are the key highlights of the report:
1.57 crore new investors during the five years FY19-FY23 entered CAMS-serviced MFs. Of these 1.57 crore, 84.8 lakh were millennials, with 54 % share 
Of these 84.8 lakh, nearly 26% were women
85% of the new millennial entrants came from urban locations - T30 locations 
This segment has cumulatively added 1.54 crore SIPs during the five-year period. 
A sizeable number (33 lakh ) have also diversified across funds houses over the five years, with having invested in more than one fund house
Digital and straight-through investment via electronic platforms is significant at 75%. Paper is still prevalent in B30 locations 
Gross inflows from millennials across the five years was over Rs1 lakh crore, of which over Rs65,000 crore was into equity schemes (growth & equity oriented schemes & hybrid schemes)
The AUM of the millennials who stayed through the five years stands at Rs96,000 crore as at March 2023.
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