Individual investors' AUM share soars eightfold in a decade

Investor share in mutual funds: Over the past ten years, individual investors have significantly increased their share of assets under management (AUM) in mutual funds, growing eightfold from FY2014 to FY2024. By mid-2024, individuals held 63 per cent of the total AUM, up from 45 per cent in FY2010, according to Fisdom Research. The total AUM in the mutual fund sector reached Rs 64.7 lakh crore in 2024, reflecting a compound annual growth rate (CAGR) of 21 per cent over the last five years.

This growth is attributed to better financial literacy, easier access to investment platforms, and the compelling long-term returns offered by mutual funds, say experts.

Impact of Financial Literacy and SIPs

The rise in individual investor participation can be traced back to enhanced financial education and a shift from physical to financial assets. Systematic Investment Plans (SIPs) have played a crucial role, with inflows reaching a record Rs 23,332 crore in July 2024. The number of SIP accounts has also hit a record high of 9.34 crore, increased increased investor trust and financial understanding.

"Investors are moving away from traditional investment options like fixed deposits and real estate, with a growing preference for mutual funds," said Siddharth Maurya, Founder & Managing Director, Vibhavangal Anukulakara.

"The proportion of equity in mutual fund AUM has jumped from 5.3 per cent in FY2014 to 14.7 per cent in FY2024, highlighting increased confidence in equity markets and professional fund management," Maurya added.

Growth beyond major cities

The mutual fund industry’s expansion is now reaching beyond metropolitan areas. From March 2019 to March 2024, the AUM share from Mumbai and Delhi dropped from 47 per cent to 39 per cent. In contrast, smaller cities have seen their share increase from 25 per cent to 35 per cent, indicating a broadening investor base.

AMCs' market dominance

The number of asset management companies (AMCs) has grown from 30 in FY2006 to 45 by July 2024. Large AMCs, with over 5 per cent market share, have strengthened their position, holding 72 per cent of the market in 2024, up from 67 per cent in 2006. Mid-sized AMCs have seen their share fall to 25 per cent, while small AMCs now account for just 1-3 per cent of the market.

Surge in passive investments

The report also highlights a notable rise in passive investments, with passive AUM reaching Rs 10.9 lakh crore in July 2024, a 40 per cent increase from the previous year. 

The share of passive AUM in total AUM has more than doubled from 7 per cent in May 2020 to 17 per cent in July 2024, reflecting a growing preference for low-cost, efficient market exposure.