India fund assets to reach $440 bln by 2012 - McKinsey

MUMBAI, March 10 (Reuters) - The total assets under management (AUM) in India would grow by 33 percent every year to reach as much as $440 billion by 2012 with mutual funds and portfolio management services as key drivers, a survey showed.

Besides, the overall economic growth will attract participation from the international investment community across retail and institutional segments, consultancy firm McKinsey & Co, which conducted the survey, said in a report on Monday.

The retail segment would grow by between 36 percent and 42 percent annually to $160 billion to $200 billion by 2012 while institutional investments would grow by 25 percent to 33 percent annually to $160 billion, it said.

"Certain new products such as real estate mutual funds and dedicated infrastructure funds have the ability to significantly add to the industry growth," Naveen Tahilyani, partner at McKinsey was quoted in a statement.

It also advocated a parity in product features and distribution commissions between unit-linked insurance products and mutual funds as insurance products enjoy certain advantages.

However, as competition increases in mutual funds, prices will be rationalised and, in turn, reduce the overall profit margins, McKinsey said in the report.

India has 33 fund houses, which managed 5.7 trillion rupees ($141.12 billion) at the end of February, data from the Association of Mutual Funds in India showed.

($1 = 40.39 Indian rupees)

(Reporting by Kaustav Roy; Editing by Ramya Venugopal)