Mutual funds in India
The first introduction of a mutual fund in India occurred in 1963, when the Government of India launched Unit Trust of India (UTI). UTI enjoyed a monopoly in the Indian mutual fund market until 1987, when a host of other government-controlled Indian financial companies established their own funds, including State Bank of India, Canara Bank and by Punjab National Bank.
Mutual funds are an under-tapped market in India
Despite being available in the market less than 10% of Indian households have invested in mutual funds. A recent report on Mutual Fund Investments in India published by research and analytics firm, Boston Analytics, suggests investors are holding back from putting their money into mutual funds due to their perceived high risk and a lack of information on how mutual funds work. There are 46 Mutual Funds as of June 2013.
The primary reason for not investing appears to be correlated with city size. Among respondents with a high savings rate, close to 40% of those who live in metros and Tier I cities considered such investments to be very risky, whereas 33% of those in Tier II cities said they did not know how or where to invest in such assets.
Mutual Funds in India are being distributed by various channels , like : Corporate Distributors, Individual Distributors , Post Offices and Banks. All these distribution channels are broadly divided into two key types :
1. One who sells Funds with low expense ratio but charges from the customers on their own, and 2. Another who sells funds with high expense ratio and get paid back as commission; they don't charge any fees from customers
The former one sells the MF plans labeled as 'Direct Plans' and the later one sells the MF Plans labelled as ' Regular Plan'
SEBI had issued a consultation paper on October 07, 2016 seeking public comments on the clarifications/amendments to SEBI (Investment Advisers) Regulations, 2013 (‘IA Regulations’). Large number of comments have been received on the proposals enumerated in the consultation paper. Based on the feedback received and meetings held with market participants ,the following proposals are stated below for public comments :
To prevent the conflict of interest that exists between “advising” of investment products and “selling” of investment products by the same entity/person, there should be clear segregation between these two activities. The investment adviser should act in the best interest of the client and should not receive commission from the product manufacturer. Further, the investment adviser shall act with due skill, care and diligence and shall ensure that its advice is offered after thorough analysis and taking into account the available investment alternatives and matching them with client’s suitability and needs.Thus, entities engaged solely in the business of “advising” on investment products shall not be permitted to sell any products to prevent conflict of interest.
Existing Provision : In terms of Regulation 22 of IA Regulations, banks, NBFCs and body corporates providing investment advisory services to their clients shall keep their investment advisory services segregated from distribution/execution services. Such entities are allowed to offer investment advisory services only through separately identifiable departments or divisions (SIDDs). The distribution or execution services can only be offered subject to the following:
i. The client shall not be under any obligation to avail the distribution or execution services offered by the investment adviser. ii. The investment adviser shall maintain arms-length relationship between its activities as investment adviser and distribution or execution services. iii. All fees and charges paid to distribution or execution service providers by the client shall be paid directly to the service providers and not through the investment adviser.
Proposal: Regulation 22 and other applicable provisions of IA Regulations are proposed to be amended as under :
i.There shall be clear segregation between the investment advisory activities and distribution/execution services. An entity offering investment advisory services shall not be permitted to offer distribution/execution services.
ii. The existing provision on offering execution/distribution services by banks, NBFCs and body corporates through separately identifiable departments or divisions (SIDDs)shall be omitted. iii. Banks, NBFCs (Non Banking Financial Coroporation) and body corporates offering investment advisory services through separately identifiable departments or divisions (SIDDs)under the existing framework shall segregate the same within a period of six months through a separate subsidiary. iv. Investment advisers who provide holistic advice/financial planning on financial products across multiple categories, viz., securities, insurance, pension, deposits, etc. need to obtain permission from the specific regulator and comply with the regulations of the respective regulators, if any. v. Entities/persons who are providing advice solely on non-securities shall not come under the purview of the SEBI (Investment Advisers) Regulations, 2013.
Larger Indian Mutual Fund Industry has benefited from outsourcing the activity of servicing their investors to two of the leading Registrar and Transfer Agents (RTAs) in India namely CAMS and Karvy. While CAMS commands close to 65% of the Assets servicing, rest is with Karvy. Franklin Templeton Mutual Fund services its investors through its own in-house RTA set up.
Both the RTAs have vibrant network of their local offices which enable the Mutual Fund Investors to transact locally. These touch points (or) Customer Service Centers (CSCs), provide a wide range of servicing including, financial transaction acceptance & processing, non financial changes, KYC fulfillment formalities, nomination registration, transmission of units apart from providing statement of accounts etc.
Average assets under management
Assets under management (AUM) is a financial term denoting the market value of all the funds being managed by a financial institution (a mutual fund, hedge fund, private equity firm, venture capital firm, or brokerage house) on behalf of its clients, investors, partners, depositors, etc.
The average assets under management of all mutual funds in India for the quarter Dec 2015 to Mar 2016 (in ₹ Lakh) is given below:
|Sr No||Mutual Fund Name||Total Schemes||QAAUM AUM (₹ Lakh.)||Prev QAAUM (₹ Lakh.)||Inc/Dec (₹ Lakh.)||Percentage|
|1||Axis Asset Management Company||263||3776454.37||3456348.88||320105||9%|
|2||Baroda Pioneer Asset Management Company||111||965630.33||925542.12||40132||4%|
|3||Birla Sun Life Asset Management Company||806||13678510.7||13684493.34||5312||0%|
|4||BNP Paribas Asset Management Company||114||509706.79||500795.21||9209||2%|
|5||BOI AXA Asset Management Company||76||238501.41||242767.91||2887||1%|
|6||Canara Robeco Asset Management Company||142||804326.86||751779.86||52627||7%|
|7||Pramerica Investment Management||8||27698||17194||10504||61%|
|8||DHFL Pramerica Asset Management Company||491||2598683.24||216345||-80979||-37%|
|9||DSP BlackRock Asset Management Company||398||4015131.25||3918267.17||96865||2%|
|10||Edelweiss Asset Management Company||70||167774.29||163236.28||4538||3%|
|11||Escorts Asset Management Company||60||28559.18||29222.27||-663||-2%|
|12||Franklin Templeton Asset Management Company||200||6784076.49||7172216.54||-384257||-5%|
|13||Goldman Sachs Asset Management Company||18||610139.99||685179.35||-75039||-11%|
|14||HDFC Asset Management Company||1173||17608456.44||17866622.24||-256390||-1%|
|15||HSBC Global Asset Management Company||155||790382.19||837762.82||-47151||-6%|
|16||ICICI Prudential Asset Management Company||1529||17596397.6||17223699||390751||2%|
|17||IDBI Asset Management Company||92||689266.37||756428.17||-67162||-9%|
|18||IDFC Asset Management Company||453||5228379.46||5486421.83||-249600||-5%|
|19||IIFCL Asset Management Asset||1||35797.56||34293.89||1504||4%|
|20||IIFL Asset Management Company||18||48543.76||42203.84||6340||15%|
|21||IL & FS Infra Asset Management Company||12||92296.34||90029.5||2267||3%|
|22||Indiabulls Asset Management Company||56||528955.04||491675.45||37279||8%|
|23||JM Financial Asset Management||179||1616090.42||1586776.74||29313||2%|
|24||Kotak Mahindra Asset Management Company||431||5873108.27||5513383.02||362464||7%|
|25||L&T Asset Management Company||246||2594480.1||2505850.82||89990||4%|
|26||LIC Nomura Mutual Fund Asset Management Company||176||1315562.4||1238408.04||92942||8%|
|27||Mirae Asset Management Company||55||313272.14||280239.04||33101||12%|
|28||Motilal Oswal Asset Management Company||31||468921.13||455222.64||14103||3%|
|29||Peerless Asset Management Company||57||98524.1||102441.7||-3917||-4%|
|30||PPFAS Asset Management Company||1||61357.1||62931.88||-1575||-3%|
|31||Principal Asset Management Company||123||528106.02||587875.66||-59770||-10%|
|32||Quantum Asset Management Company||15||66093.04||65531.63||561||1%|
|33||Reliance Asset Management Company||1015||15936949.34||15787817.36||152561||1%|
|34||Religare Global Asset Management Company||267||1959617.91||1988459.31||-28622||-1%|
|35||Sahara Asset Management Company||68||9929.16||11002.32||-758||-7%|
|36||SBI Asset Management Company||652||10732737.36||10058453.69||672760||7%|
|37||Shriram Asset Management Company||4||3716.98||3711.53||5||0%|
|38||Sundaram Asset Management Company||479||2366370.94||2187696.57||185302||8%|
|39||Tata Asset Management Company||324||3186223.17||3155590.09||26752||1%|
|40||Taurus Asset Management Company||65||394858.04||350334.19||44524||13%|
|41||Union KBC Asset Management Company||60||290228.21||273213.25||17015||6%|
|42||UTI Asset Management Company||1220||10630921.82||10612903.52||16124||0%|
|S. No||Seller||Acquired By||Year|
|1||Alliance Capital MF||Birla Sunlife||2005|
|3||AIG Global Investment Group MF||PineBridge MF||2011|
|4||Benchmark Mutual Fund||Goldman Sachs||2011|
|7||PineBridge MF||Kotak MF||2014|
|8||ING Mutual Fund||Birla Sunlife||2014|
|9||Daiwa AMC||SBI MF||2013|
|10||Goldman Sachs||Reliance MF||2015|
- "MF History http://www.amfiindia.com/research-information/mf-history". Association of Mutual Funds of India. External link in
- "Association of Mutual Funds, India". Retrieved 4 September 2013.
- "Boston Analytics - India Watch". Archived from the original on 29 July 2012. Retrieved 4 September 2013.
- "Average AUM - Fund-wise". June 2013. Retrieved 4 September 2013.
- "Average AUM". Association of Mutual Funds in India. Retrieved April 6, 2016.