A common factor among the top 10 mutual fund distributors has been their longevity and sharp focus on mutual funds despite the ups and downs in the markets. The 20 largest distributors (10 banks and 10 NDs) account for 57% (Rs.1, 033 crore) of industry’s Rs. 1,800 crore payout in FY10-11
Mumbai: Banks have emerged as the largest distribution channel of mutual funds based on the commissions earned by them. A Cafemutual study of the top 12 AMC payouts show that 17 banks have earned Rs. 597 crore in the last fiscal.
According to AMFI data, the MF industry has paid an aggregate of Rs. 1,800 crore in commissions to 529 big distributors across India. Out of Rs. 1,800 crore, a whopping 86% or Rs. 1,546 crore has been paid by only the top 12 AMCs. The 20 largest distributors (10 banks and 10 NDs) account for 57% (Rs.1, 033 crore) of industry’s Rs. 1,800 crore payout.
HSBC is the top distributor in this league of bank distributors. It earned Rs. 113 crore from the top eight fund houses alone. On an aggregate basis it received Rs.119 crore from all the fund houses which means it cornered 7% of the industry’s total commission payout of Rs. 1,800 crore.
HDFC Bank is the runner up in this category which has earned Rs. 111 crore from 11 top fund houses. HDFC Bank accounts for 6% or Rs. 116 crore of total payouts of the industry.
Among the brokerage houses and NDs, NJ India Invest is the largest distributor of mutual funds and the third largest overall across all channels. It earned Rs. 110 crore while JM Financial Service was no. 2 with an earning of Rs. 49 crore. The top 10 NDs account for 23% (Rs. 407 crore) of the total payouts of all fund houses.
Why do private banks have an edge?
Foreign and private banks are bigger players in MF distribution business than their PSU counterparts due to their long experience. “Private banks entered the distribution space much earlier than PSUs. Also, private banks have better trained manpower. They also focus a lot more on third party products,” says Amit Trivedi of Karmayog.
Foreign banks like Citibank, Standard Chartered and HSBC on the other hand have an additional advantage of global experience.
Amit observes that private banks have the benefit of learning through various market cycles while PSU banks have largely entered into distribution business during the bull phase. The passive nature of PSUs in mutual fund distribution space has also been attributed to their fear of running a reputation risk if funds sold by them don’t perform well.
National Distributors
Each ND has created its own recipe for success. NJ India has been successful due to its superior understanding and undiluted focus on the mutual fund distribution business.
JM Financial has always sold multiple funds although it has its own MF arm. Their focus has never been on their in-house products, say industry experts. Some say JM has the “perseverance advantage”, having been in the distribution business from a long time. Some of JM’s rival distribution firms had diluted their business focus from mutual funds during market downturns.
Online distributor ICICI Direct has used technology to its advantage. “ICICI Direct is the classic example of leveraging technology to reach Indian middle class investors,” adds Amit.
SPA Capital Services, the fifth largest distributor has a more institutional and HNI focus. SPA Capital is also into securities broking, merchant banking, wealth management and insurance broking business. A common factor among the top 10 mutual fund distributors has been their longevity and sharp focus on mutual funds despite the ups and downs in the markets.
Banks
Rs cr
Percentage of Total Industry Commission
HSBC
119
7%
HDFC Bank
116
6%
Citibank
88
5%
Standard Chartered Bank
77
4%
Kotak Mahindra Bank
48
3%
Axis Bank
44
2%
SBI Bank
38
2%
ICICI Bank
35
2%
The Royal Bank of Scotland N V
32
2%
Deutsche Bank AG
29
2%
Total Bank Commission
626
35%
National Dristributors/Brokers
NJ IndiaInvest Pvt Ltd
110
6%
JM Financial Service
49
3%
Bajaj Capital
38
2%
Aditya Birla Money Mart Ltd
37
2%
DSP Merrill Lynch Limited
36
2%
SPA Capital Services
33
2%
Karvy Stock Broking Limited
32
2%
ICICI Securities Limited
31
2%
Prudent Corporate Advisory Services Ltd
21
1%
BNP Paribas
20
Total ND/Brokers C
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