The latest AMFI data shows that assets from B15 markets have grown by 14% from Rs. 1.89 lakh crore in January 2015 to Rs. 2.16 lakh crore in January 2016. This means B15 assets now account for 17% of industry’s total Rs. 12.73 lakh crore AUM as on January 2016.
In terms of composition of assets, B15 has a better balance of equity and debt assets. 49% of the assets from B15 locations is in equity schemes. Further, about 23% of assets held by individual investors are from the B15 locations.
While the industry is making inroads in smaller towns, some fund officials are uncertain if they can continue to build on this momentum. This is because SEBI had allowed AMCs to charge additional TER of up to 30 basis points if the new inflows from these cities are minimum 30% of the total inflows. This allows AMCs to pay higher commission to B15 distributors. Also, the cap of 1% upfront is not applicable to B15 market.
Recently, there has been a debate in the industry on whether T15 investors should be compensating for growing B15 market. Also, the Sumit Bose committee has recommended bringing parity in B15 and T15 commissions. The market regulator is also pushing AMCs to reduce costs and some believe that the B15 incentive may not continue going forward. “I believe that any excess cost should be reduced. For example, expecting B15 incentive to continue is a wrong belief. This incentive may go in the days to come,” said the CEO of a foreign fund house.
Some officials believe that the B15 market will continue to grow even if the incentive goes away. “There are many factors which will help us expand the B15 market. To start with, AMCs have tie up with banks, especially public sector banks which a good presence in smaller towns. Also, distributors want to grow their business irrespective of the reduced commission. Further, investor awareness campaigns held in smaller towns are also helping distributors acquire clients. Eventually, as the markets grow the demand for mutual funds will go up,” said the sales head of a public sector fund house.
