MF industry’s AUM share in beyond 15 cities increases marginally

The mutual fund industry is making slow and steady inroads in the hinterland. The latest data published by AMFI shows that the AUM share of beyond 15 cities has gone up marginally in September quarter compared to the corresponding period last year. Cities like Muzzafarpur, Burdwan, Bilaspur, Ajmer and Rourkela have witnessed spurt in inflows.

As a result, the inflows from top 15 cities is showing a decline. The AUM share of top 15 cities fell from 87.43% in September 2012 to 86.57 % in September 2013.

Mumbai, which contributes the highest inflows in the mutual fund industry, saw its AUM share decline by 3% to 42% in September 2013 from 45% in the previous corresponding year.

Last year, SEBI had allowed AMCs to charge additional expenses in their schemes (based on certain conditions) if they managed to get inflows from beyond top 15 cities. AMCs have also hiked the payouts to distributors in these cities. Distributors who source applications from beyond top 15 cities receive 1.25% to 1.50% higher commission compared to distributors in top 15 cities. The applications which are entitled to get higher commissions are identified on the basis of area pin codes of investors address.

An analysis of the AUM concentration of the top fund houses shows that UTI Mutual Fund received the highest inflow (23%) from B-15 cities, followed by HDFC (19%), Reliance (18.8%), SBI (18%), ICICI Prudential (16%) and Birla Sun Life (12%).

Some AMCs are planning to open branches in B-15 cities while others are trying to leverage their existing distribution force in smaller towns. D P Singh, Executive Director & Chief Marketing Officer (Domestic Business), SBI Mutual Fund said “We are planning to open around 24 branches in smaller towns in the next three months. Also, we are training distributors and employees in banks and national distribution firms.”

AMCs promoted by banks and those having a rural presence stand to gain the most.

The industry has adopted multi-pronged approach to reach out to investors in B-15 cities which includes investor awareness, training and enrolling new cadre of distributors. UTI Mutual Fund has adopted investor awareness initiative by engaging with intermediaries to drive inflows from B-15 cities. It has 460 offices in various Talukas which are headed by Business Development Associates (BDAs). Moreover, it has enrolled 1500 new distributors in smaller towns.

 “All AMCs are taking initiatives to increase penetration which will eventually help increase the market share. We are doing a lot of training in these centers. There are some operational challenges which we are trying to sort out. For instance, we have to claw back the commission if money is redeemed before one year,” said Debasish Mallick, MD & CEO, IDBI Mutual Fund.

Fund officials are hopeful that the industry’s efforts will pay off in two years.

AUM concentration in top 15 cities