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Trends Direct investments on the rise

Direct investments on the rise

Direct plans eat into the market share of IFAs
Daya R Mar 8, 2017

The availability of online platforms has increased the popularity of direct investments. According to a study done by Karvy, the share of direct investments in overall AUM has increased from 17% to 48% from the time direct plans have introduced.

The growing popularity of direct plans has affected the market share of IFAs. The study reveals further that IFAs share in MF AUM has dropped from 25% in March 2011 to 19% in November 2016. The trend is even more apparent in equity segment where the market share of IFAs has decreased from a whopping 51% in March 2011 to 39% in November 2016 while the investments in direct plans have increased from 6% to 19%.

However, in absolute terms, the contribution of IFAs in AUM has increased from Rs.65000 crore to Rs.1 lakh crore. In equity, such contributions has grown to Rs.58,000 crore in November 2016 from Rs.35,600 crore in March 2011. This growth is partly due to market-to-market gain and mobilization of assets.

Talking about the jump in direct investment, a senior official from an online distribution platform feels that the increase in awareness of people towards mutual funds is one of the primary reasons for direct investment. “People have been getting a lot of exposure to mutual funds thanks to ads on TV or through investor awareness programs,” he says.

Another reason for the increase in direct investments according to him is the gaining popularity of online investment vehicles. “Investing in mutual funds online is very eas; this allows seasoned players to tap into this option,” he says. Many online platforms have sprouted, helping investors tap into direct funds as an investment channel.

Another reason for increase in direct investments could be the low expense ratio. According to the data by Value Research, the average expense ratio of direct plans of equity schemes with a corpus size of over Rs.1,000 crore is 1.51% as compared to 2.28% of regular plans. The difference between expense ratios of the two types of plans is as low as 10-50 basis points in some schemes and as high as 100-148 basis points in some others.

 

6 Comments
Srini · 2 weeks ago
Can we get a breakup of the how much is institutional and how much is retail investment in the said Direct Investments?
Anvi Shah · 2 weeks ago
Must appreciate the growth from 17% to whopping 48% now. Heartiest congratulations to SEBI & AMC teams for there focussed approach. No one else can make fools of IFA better than you duo.. Any guess, how much time it will take to make 100% AUM direct ??
Prashant · 2 weeks ago
If an investor goes direct in the closed ended fund and looses money, who Wil be held responsible? And will SEBI disallow direct investment since direct investment is misselling and a or will they ban the fund house or will they reduce expense ratios of funds getting sold directly?
Anvi shah · 2 weeks ago
SEBI is least bother about mis selling... there main motto is to remove IFA segment ( commission agent ) from the business & they are doing it successfully. Helpless for those who still lives in fools paradise.
Reply
Sam Koshy · 2 weeks ago
Dear Daya
Pls post a detailed break up of institutional and retail investments and the respective change happened. Otherwise you are not doing justice to your profession..!
vinay · 2 weeks ago
Half-cooked data once again. in direct plan, what is the share of retail investors? Why this breakup is not given? Again Karvy report says that 8 out of 10 direct investors exit within 1 year. You should read all data points to understand the total impact. presenting half-cooked data by you is only misleading people. present complete data or please stop writing articles like this with biased views
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