To encourage retail investors, especially in B30 cities, a few fund houses have reduced their minimum application size from Rs.5,000 to Rs.1,000 to make mutual funds more attractive.
While Essel Finance MF, the erstwhile Peerless MF has been following this practice for quite some time, fund houses such as Aditya Birla Sun Life and DSP BlackRock have reduced their minimum application size from Rs.5,000 to Rs.1,000 to make it more affordable for retail investors. In fact, last week, Aditya Birla Sun Life Mutual Fund reduced the minimum application amount to as little as Rs.500 in their flagship schemes such as Aditya Birla Sun Life Frontline Equity Fund and Aditya Birla Sun Life Equity Fund.
Kishore Chamria, Head of Business Development, Aditya Birla Sun Life Mutual Fund said the reduction of minimum application size would increase their retail footprint. “Based on the feedback of our distributors, we have reduced the minimum application size on our scheme to Rs.1,000 and Rs.500 (in select scheme). These distributors feel that many investors are not comfortable putting Rs.5,000 in one go,” he said.
Seconding Chamria’s view, Rajiv Shastri, CEO, Essel Finance MF said, “We reduced our application size during Peerless days to attract first time investors to MFs. We have seen that these people invest more money once they get comfortable with mutual funds.” In fact, he said that his company would reduce it further with the decrease in transaction cost. “Currently, the transaction cost in physical mode is much higher than online. We will reduce the application size further once everything goes online,” he added.
Another reason for reducing the minimum application size is targeting investors who invest through online platforms. Faisal H Rahman, Product Head, Mutual Fund, Coin, Zerodha’s mutual fund distribution arm said that instead of using the conventional SIP model, his company promotes lumpsum investment plus additional purchase in a systematic manner to invest in mutual funds. “Additional investment gives us flexibility to modify the systematic investments. Many first time investors who invest through an online platform are comfortable putting a small amount to invest in mutual funds,” he said.
Rahman added that most of their investors invest in the schemes of Aditya Birla Sun Life MF and DSP BlackRock MF as they accept very small ticket sizes.
SBI Mutual Fund is also planning to reduce their minimum application amount to Rs.1,000. DP Singh, CMO, SBI Mutual Fund said, “Since scheme re-categorisation exercise is going on, it is the right time to make some cosmetic changes such as reducing the minimum application size to make mutual funds accessible to customers and reach to as many investors as possible,” said Singh.
