AMCs paid Rs 169 crore commission to their affiliates

Affiliates continue to be top distributors for many AMCs

In FY 2011-12, 8 bank sponsored AMCs paid a total commission of Rs 783 crore, out of which Rs 169 crore was paid to their affiliates. Out of the Rs 46 crore commission paid by Axis Mutual Fund, 76% or Rs 35 crore went to Axis Bank. Similarly, out of the Rs 28 crore commission paid by the AMC, Rs 17 crore went to HSBC Bank. SBI MF paid 37% or Rs 31 crore to SBI and associate banks out of the Rs 84 crore total commission. 

Fund officials say that having an in-house distribution network is not the only key to succeed in this industry. For affiliates to provide support to an AMC, the products have to deliver value. There are instances where AMCs have not been able to capitalise on their in-house distribution strength.

D Ramanathan, Sr. VP & National Head – Sales & Distribution, Motilal Oswal Mutual Fund says that any new AMC entering the market has to rely on its in-house distribution strength to attain a certain size.

“AMCs generally make best use of their in-house distribution strength till they attain a certain size in terms of AUM. Then automatically more distribution partners join the bandwagon. It’s a strategic move. Large fund houses don’t have a problem but you’ll see that medium and small fund houses will have a more skewed distribution network. For new AMCs to attract distributors the proposition matters. There has to be a meaningful product differentiation,” says Ramanathan

Karan Datta, National Sales Head at Axis Mutual Fund says that for an affiliate to support an AMC the products have to deliver value to their customers. He points out that in its last equity NFO - Axis Focused 25 Fund, out of the 16,000 investors it got, 9,000 are first time MF investors. Axis MF has 4.50 lakh customers now. He says that their asset allocation/hybrid funds have been received well not only by Axis Bank but also by the distribution community as well.

“For any AMC to succeed it has to manufacture innovative yet simple products. If any AMC continues to do that then distributors also tend to start accepting and supporting them. Our focus was to cater to a much larger audience. We are among the top six AMCs in the hybrid space in terms of assets under management. I think now and in the future Axis Bank will continue supporting this idea because it makes immense sense for their customers as well. Gone are the days of just launching funds and getting distribution support from affiliates. The products have to deliver and add value,” says Karan.  

Industry officials say that there have been instances where AMCs have not been able to fully capitalise on their in-house distribution network for a variety of reasons.

Commissions paid by AMCs to their affiliates

 Also read: Bank sponsored MFs take help of affiliates to tap customers