Commissions of top 20 mutual fund distributors go up by 43 per cent

The commission to the top 20 mutual fund distributors went up 43%, from Rs2,153 crore in FY15-16 to Rs3,080 crore in FY16-17, shows AMFI data. At the same time, the assets under management of the mutual fund industry rose 42% in FY 2016-17, i.e., from Rs12.33 lakh crore to Rs17.54 lakh crore.

Experts attributed this growth to market gains and steady inflows in equity funds. While the BSE Sensex inched up by 4,350 points, or 17%, to close at 29,600 points, equity funds witnessed 30% growth in net inflows last fiscal.  As on March 2017, equity funds recorded net inflows of Rs1.31 lakh crore while it was Rs1.02 lakh crore in the preceding fiscal. Equity funds include pure equity, ELSS, balanced funds and ETFs that tracks index.

Neeraj Choksi, Jt. MD, NJ India, attributed this growth to steady inflows in equity funds through SIPs. “Last fiscal was good for the industry as it witnessed regular inflows in equity funds through SIPs. Another factor that has contributed to the increase in gross commission is introduction of forward charge mechanism. If we factor in the impact of service tax, then the difference between gross commissions of FY 2015-16 and FY 2016-17 is not significant.”

In the 2016 budget, the finance minister of India introduced the forward charge mechanism in mutual funds, paving the way for AMCs to pay gross commissions to distributors without deducting service tax.

Distributors point out that the figures published by AMFI are gross commissions and their net earnings are less since they incur expenses on running their businesses.

Largest distributors by commission earned

Among top 20 distributors, NJ India bucked the trend. NJ India pipped HDFC bank and Axis Bank to become the largest mutual fund distributor. NJ India earnings grew from Rs326 crore in FY 2015-16 to Rs443 crore in FY 2016-17. Its assets under advisory increased by Rs7,000 crore, to reach Rs31,000 crore, during the same period.

The second largest distributor is HDFC Bank, which earned close to Rs400 crore, followed by ICICI Bank at Rs280 crore and Axis Bank at Rs250 crore.

Among the distributors who recorded the highest growth in commission earnings in percentage terms were SBI Bank, Julius Baer (erstwhile Merrill Lynch) and Axis Bank. Only SPA Capital reported a decline, albeit a small one, in its commission earnings.

Assets under advisory

The assets under advisory are an indicator of how much commission the distributor earns. For instance, Citibank N.A managed AUM of Rs26,201 crore and earned Rs185 crore (70 basis points of the assets under advisory). HDFC Bank managed Rs45,815 crore and earned Rs397 crore, that is, 87 basis points of the assets under advisory.

While HDFC Bank stood at second position in terms of gross commission received last fiscal, it continued to hold the mantle of being the largest distributor in terms of AUA. HDFC Bank’s MF AUA increased by Rs8,233 crore, from Rs37,582 crore in FY15-16 to Rs45,815 in FY 2016-17.

Axis stood at second position in terms of AUA ranking at Rs35,650 crore, followed by NJ India (Rs31,000 crore) and ICICI Bank at Rs27,965 crore.

ICICI Securities has also recorded a healthy growth of 27% in its AUA as it grew from close to Rs.16,000 crore to Rs.20310 crore. Cafemutual had reported that the company had witnessed a downfall due to drafting errors. We regret the inconvinience caused.

Gross commission of top 20 distributors

Assets under advisory of top 20 distributors