The Great Indian Mutual Fund; Positioned as instruments that are safe (safer than venturing on one's own into equities) and that promise attractive returns (more attractive than bank deposits), mutual funds are supposed to be the retail investor's best bet. Why is it then that 85-90 per cent of the assets managed by Indian funds are those of institutions and high net worth individuals?

From the funds' point of view, chasing corporate money gives them the obvious advantage of size. The larger the assets of a fund, the more likely it is to attract even more investors. Says Vikaas Sachdeva, Country Head-Business Development, ING MF: "Size matters and that's the reason why everyone is chasing AUMs. Irrespective of a fund manager's ability to generate returns, investors tend to invest in asset management companies (AMCs) with higher AUMs." What is more, size assumes significance in an industry that's still only 14 years old, and is still seeing a steady stream of new entrants who are attempting to play catch-up (although UTI was the first mutual fund to be flagged off in 1964, the private sector was allowed into asset management only in 1993). There's only one way to open the account. As Arindam Ghosh, Head of Asia Pacific, Mirae Asset Management, a Korean major in the process of setting up shop in India, says: "Our initial strategy will be to focus on high net-worth individuals (HNIs) and institutional money." Adds Nilesh Shah, Chief Investment Officer & Deputy Managing Director, Prudential ICICI AMC: "Relatively, we are still new as an industry. It's only in the last five years that a good market has helped us to build confidence and a comfort level amongst investors." As of 2006, the Indian MF industry accounted for just 0.26 per cent of the total assets managed by mutual funds across the globe. Another gripe of fund managers is the way the industry has been structured. The smallish capital requirement (Rs 10 crore) to start a fund, they feel, is growth restrictive in the longer run. For instance, the lack of capital doesn't allow MFs to invest in investor education. Instead they have to rely on distributors to increase awareness and highlight investor dos and don'ts (such as the dangers of excessive portfolio churning, for example). Says Vijayan: "If the capital requirement is increased, and mutual funds are able to exercise control over distributors and agents, that will bring a sea change in the working of the industry." And although Sanjay Prakash, ceo, hsbc AMC, says: "Till the level of corporate governance doesn't improve among individual mutual funds, the industry will not see accelerated growth," MFs aren't pleased with the inability of the regulators to keep a check on distributors. Vijayan hints at the introduction of a 'tied agent' concept (as is followed in the insurance sector), whereby the fund will reward distributors based