Factors Affecting the Fund Selection Capability of Mutual Fund Advisors

Abstract

The Mutual Fund Industry of India traces its origin from the establishment of the Unit Trust of India in 1964. The mutual fund industry of India has seen a tremendous growth since its incorporation. A number of research studies have been carried out so far to understand the nature of the Indian mutual fund industry. However, every study attempts to bring forth something that is of great interest to the stakeholders of the industry. Much has been discussed by the researchers regarding the evolution and growth of Indian Mutual fund Industry, the performance evaluation of different mutual fund schemes, the investors’ behaviour towards mutual funds etc. However, no major study has been done so far regarding the fund selection capability of the mutual fund advisors in India. Undoubtedly, the contribution of the mutual fund advisors in taking the Indian Mutual Fund Industry to new heights is self-explanatory. Such a huge growth of Assets under Management (Rs 10827.57crore, as of March 31, 2015) can be attributed mainly to the expertise of the fund advisors/managers. Thus, the main objective of the study is to find the factors that matter to the financial advisors while making recommendations about the mutual fund schemes to the Indian mutual fund investors. The important factors that are considered by the fund advisors include the Past Performance of a Mutual Fund, the Risk associated with the Fund, Brand equity of the fund and the Current market conditions. The average performing funds which involve moderate level of risk and are mostly debt oriented are recommended by the financial advisors mostly. Regarding the current market conditions factor, the presence of optimistic conditions is believed to be conducive for the better returns on fund investments. If the brand equity for a particular fund is high, the advisors perceive such funds as the mouth-watering ones.