B15 assets continue to grow. The latest AMFI data shows that B15 assets have increased from Rs. 1.94 lakh crore in June 2015 to Rs. 2.42 lakh crore in June 2016.
As a result, 16% of the assets of the mutual fund industry are now concentrated in B15 locations as on June 2016.
While AMCs always had a presence in B15 markets, SEBI’s nudge to increase penetration in small towns is also helping. This is evident by the growth in assets in B15 locations. AMFI data shows that B15 assets have grown by 25% while the industry’s assets grew by 18% during the same period.
“It’s not just that SEBI pushed, the potential was also there. As an industry, we have been focussing on T15. In fact, it amazes me as a CEO, how some mutual funds did not go there,” Sundeep Sikka, ED & CEO, Reliance Nippon Life Asset Management had said in the recently held Mint MF conclave.
If we look at the mix of assets in B15 locations, B15 locations have a better balance of equity and non-equity assets. 50% of the assets from B15 locations are in equity schemes. About 24% of assets held by individual investors are from the B15 locations while 10% of institutional assets come from B15 locations.
SEBI has 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. However, there has been a debate in the industry on whether T15 investors should be compensating for growing B15 market. The Sumit Bose committee has also recommended bringing parity in B15 and T15 commissions.
Nevertheless, fund officials believe that B15 assets will continue to grow. “There are many factors which will help us expand the B15 market. To start with, AMCs have tied up with banks, especially public sector banks which have 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 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.
