Low MF assets speak volumes on investor apathy

Despite a booming economy and vibrant equity markets, equity assets under management at many mutual fund houses remain abysmally low 

At a time when the Indian economy is being lauded for its relentless growth and Indian companies are in the process of raising thousands of crores in the primary markets, the mutual fund industry is standing out like an eyesore. The sorry state of affairs in the mutual fund industry is evident from the miniscule corpus many of the fund houses are managing.

Here are the unpleasant facts. 18 out of 37 Asset Management Companies (AMCs) have less than Rs1,000 crore as assets under management (AUM) in their equity schemes. From these, 13 funds have less than Rs500 crore of AUMs. On an average, these 18 fund houses have Rs355.99 crore in equity MF schemes. Between them, they are managing a ridiculously low corpus of Rs6,407.80 crore.

Reliance Mutual Fund, the largest fund house, has AUM of Rs35,204 crore. HDFC Mutual Fund manages a corpus of Rs22,657 crore. These amounts might seem princely when compared to the small fund houses, but compared to international fund houses, even these are paltry.

Shinsei Mutual Fund is the smallest among the 18 funds, having a corpus of Rs19.47 crore as on 10 February 2010 while Escorts Mutual Fund and Benchmark Mutual Fund have Rs28.32 crore and Rs48.88 crore respectively in their kitty.

Quantum Mutual Fund and Baroda Pioneer Mutual Fund have AUM of Rs48.96 crore and Rs66.14 crore respectively.

Some of the bigger names in the industry like Bharti AXA Mutual Fund (Rs308.37 crore), AIG Mutual Fund (Rs612 crore) and Axis Mutual Fund (Rs874.11 crore) also appear in the list of funds having less than Rs1,000 crore.

Indian companies are capitalising on the recent bull-run by raising thousands of crores through IPOs and FPOs. In 2010, 17 companies have come out with public offers, (as on 8 March 2010). Despite the rush for raising funds and the flourishing equity markets, the investing public seems disinterested in vying for a share of the pie. The action in the equity markets has failed to catch on to the mutual fund industry.

Indeed, the lull being witnessed by most equity fund houses is a study in contrast to the growth of the economy. Despite equities being touted as the best asset class for the long term, investors continue to shy away from equities. Even the government’s efforts towards encouraging participation in equity mutual funds have failed to do the trick.
 

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    COMMENTS

    Yogesh P K

    1 decade ago

    I think mutual fund houses are systematically (read legally) killed by government through AMFI to encourage insurance sector from which government earn a lot of revenue. Many mutual agents have stopped selling mutual fund product as now they earn no commission unless given by customers. Lack of incentive to agents is one of the biggest reason for this situation. Many mutual fund advisors have now started selling ULIP plans where they earn high commission.

    mahesh

    1 decade ago

    So we are trying to say that the MF industry is motivated when fat commisions are paid to distributors...What an irony Mf are meant to be an investment engine and not a commision making one ... I agree that banning the entry loads has contributed to demotivation of the distributors ...however it does highlight the fact how gullible an an indian investor is ....just because a distributors wants to make a good commision he will push an X mF to an investors who unfortunately is the one loosing money .....I believe this is the best opportunity for an investor to get himself educated about the tactics that were previously employed by commision hungry distributors to drive sales of an X MF. i believe that reality doesnt hide itself for long...... looking at the sats that are very well highlighted by moneylife we should learn our lessons.....

    K B Patil

    1 decade ago

    Investing in mutual funds is not an easy process. Brokers and distributors show interest in purchases only. For redemptions, you have to send requests to the MFs branch and they are mostly situated in urban areas.
    Then finally, KYC norms may turn out to be the last nail in the coffin. You can buy shares worth lakhs online. But, now KYC norms are again being tinkered with. Then, MF houses are coming with new funds which are nothing but old wine in new bottle. MFs never wanted to dirty their hands and sweat it out to educate investors in semi urban areas. Now, they are reaping the fruits of their laziness.

    Nagesh K

    1 decade ago

    This is because of ban on entry loads. SEBI took a one sided view of the issue. Ample options were available for corrective action on erring distributors which were not utilised, instead it went on banning entry loads. Now other products will be sold by distributors.

    Anil

    1 decade ago

    You can not apply online for mutual fund.
    If you want to apply for some fund which is not sold by your distributor then you can not buy. I tried to open online transaction account but hardly any possitive responce from banks. Most want to push ULIPs as they offer hefty commision to agents. Idea of ATMF(any time mutual fund) was floated long back but no progress so far. Also if a fund is not serviced by CAMS or Karvy, there are few takers.

    Anil

    Michael

    1 decade ago

    This is a wake up call to the regulators who took a hasty decision of banning entry loads and thereby advisors commissions. All of us advisors are not the villians in this story please! This is also for the media who also paint us black in print, and the Fund house bosses who silently followed AMFI and SEBI not forgetting our contribution to the industry. These decisions made in air conditioned cabins and board rooms should have taken the pulse of the situation on the ground.

    Pradip Kumar Daftari

    1 decade ago

    Mutual Funds industry in India is still in the nascent stage. Rural and Semi Urban people needs to be educated and brought to its fold. Abolision of entry load and Distributor commission is the sole reason for the degrowth. In fact, marketing people needed more incentives to spread the awareness.

    MK

    1 decade ago

    I agree with Manoj & VSM, mutual funds are not bought but sold in India. Another typical example is government sponsored NPS, which is yet to take off basically because there is no incentive to those who would like to recommend it to their clients. Direct marketing in India will take ages before it takes off.

    VSM

    1 decade ago

    Every products needs marketing. The marketing people will be compensated adequatly. Without remuneration who will work for it. The SEBI and the AMC'S think about it.

    Manoj Chaturvedi

    1 decade ago

    Lull in MF industry is not because of investors disintrest rather it is because of abolition of entry load on MF investments by SEBI from 1.8.09 & negligible payouts by AMC to the Distributors.Fact that since August 09, MF Industries AUM in Equity has been constantly faling. MF industry in India has always been compared to MF Industry in the west by SEBI where more than 90% of Investors invest in equity markets as compare to India where less than 10% of Investors invest. Fact is MF Industry in India is in its nacent stage.

    Mayuresh Risbud

    1 decade ago

    though the sebi has cut the brokerage the setback has to face to the amc's

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