Investors still prefer regular plans when it comes to equities

The latest MFDEx report shows that when it comes to equity funds, it is the regular plans that dominate. The report covers 96% of the industry.

In the first nine months of FY18-19, regular plans reported Rs. 2.05 lakh of gross sales. Meanwhile, direct channel saw Rs. 57,992 crore in sales during the period. However, a large chunk of equity inflows in direct plans has come from EPFO in ETFs.

Talking about the different channel sales figures, Ashutosh Bishnoi, MD and CEO, Mahindra MF said, “Distributors have been driving mutual fund sales for more than 25 years as their business model is tried and tested. Meanwhile, direct plans are still in the trial phase. Both new age distributors and investors have been testing the waters. In my view, many investors will come back to advisors once they find that investing is not just ease of execution; it is value added services of advisors that matter.”

While direct channel saw higher inflows compared to other channels, if we combine inflows from all distribution channels - IFAs, banks, national distributors, regional distributors and online players then regular plans still drive equity investments in mutual funds in April to December 2018.

Amongst the different distribution channels, private banks topped the charts with Rs. 49,802 crore of inflows. The contribution of IFAs was slightly lower at Rs. 49,114 crore while online players and offshore advisors that come under ‘others’ category came in the third place with Rs. 47,524 crore in sales.

The adoption of online platform by investors in tier 2 and tier 3 cities may have helped in the growth of this segment. Experts say that online mutual fund platforms investing through both both regular and direct plans are seeing interest in tier 2 and tier 3 cities where there is less penetration of physical distribution network.

Geographically private banks report the highest share amongst the different distribution channels in T30 cities (Rs. 41,658 crore) while IFAs clinch the top spot in B30 cities (Rs. 14,302 crore).

Overall, in T30 cities, direct investors share in equity gross sales is 25%. Private banks and IFAs follow direct investors with 20% and 17% share in equity gross sales. However, in B30 cities, IFAs share in equity gross sales is 27%, followed by others category at 22% and private banks at 16%. Direct investors share in equity gross sales was just 10% in B30 cities.

                                       Equity flows by distribution channel

Source: CAMS