Bank sponsored AMCs gaining stronger foothold in B-15 cities

Principal, HDFC, SBI, Axis, Canara Robeco and Union KBC have over 17% of their AUM coming from B-15 cities.

AMCs having banks as promoters like Principal, HDFC, SBI, Axis, Canara Robeco, Union KBC, ICICI Prudential, IDBI etc. have a large proportion of their AUM coming from B-15 cities, shows an analysis of geographical concentration of AMCs AAUM in B-15 cities done by Cafemutual.

Among such fund houses, Principal Mutual Fund which is promoted by Punjab National Bank and Vijaya Bank has the highest proportion of AUM coming from B-15 cities. Out of Rs.4,134 crore AUM managed by Principal, 24% comes from B-15 cities. Similarly, HDFC, SBI and Axis have 20%, 19% and 18% respectively of their AUM coming from B-15 cities.

Experts attributed this to huge banking network of the promoters group across the country. “Such fund houses carry out distribution through their banking network widely spread across the country. Also, fund houses having no banking partner need to open new branches to increase their business in small cities and town which is not sustainable for them. Hence, AMCs having banks as promoters have an edge over others ,” said a senior official of mid-sized foreign AMC.

RajanGhotgalkar, Managing Director, Principal Mutual Funds, said, “With the help of Punjab National Bank and Vijaya Bank, we have organized several investor awareness programs in B-15 cities. We aim to spread the cause of mutual funds and develop a discipline of investment among investors through these programmes. As of now, the average ticket size from these cities is very low but we are hopeful that we will get healthy business from these cities once investors have confidence in mutual funds.” Last year, Principal MF had a 14% AUM concentration in B-15 cities which increased to 24 percent in March 2014.

Jeantine Van Der Feest, Head Products, Canara Robeco said that her fund house has increased its focus on sales through banking channels and national distributors in order to expand its reach in B-15 cities. “Significant steps have been taken to further strengthen the cooperation with Canara Bank, for example through educating both bank personnel as well as clients on the benefits of investing through mutual funds via the SIP route. This was done, amongst others, through the successful execution of sales training programs and the organization of Financial Expos, a Canara Bank initiative, to reach out to customers and inform them on financial products. Canara Bank alone has 4700 branches across India. All these efforts have resulted in increased SIP sales, also in B-15, which account for continuous and sustainable monthly inflows in a number of schemes. Furthermore efforts to activate IFA segment in B-15 locations have been initiated recently.”

Fund houses % of AAUM in B-15

                                                Study: Cafemutual

Overall, UTI Mutual Fund has the highest proportion of its AUMs coming from B-15 cities. Out of Rs 74,233 crore AUM managed by UTI, 34% comes from B-15 cities.

Other players like Religare MF, Reliance and Franklin Templeton have also received healthy investments from hinterland. Religare MF has 24% of its AUM coming from the hinterland. Reliance boasted of 18% AUM concentration in B-15 cities. Similarly, Franklin Templeton MF has 15% AUM concentration in such places.The figures of Tata, JP Morgan, Goldman Sacs and Peerless MF figures could not be obtained till the filing of this story.

The analysis was done on the basis of AMCs quarterly disclosure of AUM as on March 2013.  

SEBI has allowed AMCs to charge higher expense ratio on assets sourced from beyond the top 15 cities. Fund houses have also hiked the commission structure for application received from these towns. Currently the top 15 cities account for nearly 86% of industry’s AUM. Nearly 6% of industry’s assets are concentrated in the next top 20 cities (those beyond top 15).