Associate distributors AUA in balanced funds increases 200 percent

Associate distributors of AMCs, such as banks and their broking arm, have been actively distributing balanced funds to their clients. Thanks to the favourable tax structure and attractive returns, balanced schemes have gained a lot of popularity among mutual fund investors.

Data from company disclosures of the top 15 fund houses shows that the assets under balanced funds from associate distributors made a significant jump in 2017. Although balanced funds assets were highest in the non-associate distributor category in absolute terms, associate distributors saw the highest increase in AUM in percentage terms.

Assets under balanced funds from associate distributors in the top 15 fund houses were at Rs.27,304 crore in December 2017. It registered an increase of Rs.18,749 crore, or 219%, in one year.

A senior official from a large fund house attributes this to lower base. “Non-associate distributors have a lion’s share in balanced funds. Balanced funds have gained popularity recently among associate distributors. Hence we see a higher percentage growth of balanced funds under associate distributors,” he said.

Another reason he pointed out is regular dividend payouts. “Many large investors of banks have invested in balanced funds to get tax free dividend,” he added.

The presence of a parent bank and its branches which are spread across the country may have also helped these fund houses garner assets in this category. The fund houses sponsored by banks witnessed massive growth in the AUM of balanced funds from their associated distributors.

Some of these fund houses are HDFC MF, SBI MF and ICICI Prudential MF. The assets under the associate distributor category of SBI MF increased from Rs.2,000 crore to nearly Rs.10,000 crore while the AUM of balanced fund of ICICI Prudential MF increased by 633% from Rs.677 crore to Rs.5,000 crore in December 2017.  

DP Singh, CMO, SBI MF, says that the presence of bank branches does not have a bearing on the growth of assets of any particular category; it is more generic in nature. “Although the presence of bank branches does help, it is the performance of the fund that matters,” the CMO said.

An industry expert, requesting anonymity, said that associate distributors are product-oriented rather than goal-oriented. “Banks have been pushing balanced funds with their customers as these are easier to sell. Therefore, when a customer’s fixed deposit matures they try to push for balanced funds. The monthly dividends have helped banks to sell mutual funds in a big way,” he said.   

AUA of associate distributors in balanced funds of top 15 fund houses

Source: company disclosure

*L&T Prudence Fund comes under equity funds