A sponsor is the promoter that brings in capital to set up the AMC and makes an application for registration of the mutual fund. The role of the sponsor does not end here.
Sponsors bring in contributions by parking their excess funds. As on March 2017, Birla Sun Life Mutual Fund registered the highest contribution from sponsors and associates among the 39 fund houses in the country. Out of Rs1.97 lakh crore AUM in March, sponsors and associates contributed Rs15,166 crore or 7% to the total AUM.
To arrive at the contributions by sponsors, we took direct investments done by the corporate sponsors and associates from the average monthly AAUM disclosed by the fund houses. These sponsors and associates usually park their excess funds in liquid and short-term debt funds.
HDFC Mutual Fund followed Birla Sun Life with a contribution of Rs7,369 crore or 3% of overall AUM from its sponsors and associate group. Of this, they invested close to Rs6,600 in liquid funds.
In absolute terms, Reliance Mutual Fund, DSP BlackRock Mutual Fund and UTI Mutual Fund also had substantial contribution from their sponsors and associates.
In percentage terms, fund houses like DHFL Pramerica Mutual Fund and Motilal Oswal received a healthy contribution of Rs1,850 (7% of total AUM) and Rs1,101 (13% of overall AUM), respectively, from their sponsors and associates.
Among top 10 fund houses, Franklin Templeton Mutual Fund had the lowest contribution from sponsors and associates. The AUM from sponsors stood at Rs10 crore in March, which is not even a percentage of their AUM.
Of all the fund houses, PPFAS Mutual Fund had the lowest contribution from sponsors and associates. Its AUM of corporate sponsors stood at Rs.97 lakh. However, if we include contributions from its key employees such as CEO, CIO and senior management, it went up to Rs.94 crore.
Rajesh Patwardhan, CMO, LIC Mutual Fund believes that increase in promoter’s investment in the fund house is good news for investors. “Promoters investing in the fund house shows their confidence in the fund house. It shows that the sponsors are serious about their business,” says Rajesh.
Overall, sponsors and associates contributed close to Rs56,000 crore in mutual funds, which is 3% of industry AUM. Of this, they invested Rs52,700 in debt schemes predominantly liquid funds.
Among equity funds, sponsors and associates prefer investing in arbitrage funds.
Rajesh further adds that promoters invest in debt schemes primarily liquid funds, as debt funds are considerably safer than equity funds. Equity funds are more prone to the vagaries of the market and institutions by their very nature are averse to risk.
However, sponsors and associates of Motilal Oswal Mutual Fund are exceptional. They contributed majority of their money in pure equity funds. Of the total contribution of Rs1,101 crore from sponsors and associates, Rs1,098 or almost 100% is in equity funds. Motilal Oswal MF manages only one fund in debt fund category, which is a short-term debt fund.
Contribution (in Rs crore) of sponsors and associates, as on March 2017
Fund house |
Sponsor contribution as on March, 2017 |
Total AUM as on March, 2017 |
Percentage of the total AUM |
Birla Sun Life MF |
15,166 |
206,228 |
7% |
HDFC MF |
7,370 |
239,595 |
3% |
Reliance MF |
5,116 |
213,668 |
2% |
DSP BlackRock MF |
3,415 |
65,931 |
5% |
UTI MF |
3,363 |
138,724 |
2% |
ICICI Prudential |
2,951 |
247,994 |
1% |
SBI |
1,194 |
162,707 |
0.73% |
Kotak |
897 |
95,897 |
0.93% |
IDFC |
660 |
58,817 |
1% |
Franklin Templeton |
10 |
84,291 |
0.11% |
Source: disclosure by fund houses