Experts attribute this concentration to institutional flows, low expense ratio and herd mentality.
An analysis of quarterly average AUM shows that top five fund houses – HDFC, ICICI Prudential, Reliance, Birla Sun Life and UTI account for almost 60% of total MF industry’s debt AUM.
Of the Rs. 6.13 lakh crore debt AUM, the top five AMCs managed Rs.4.10 lakh crore as on December 2014. The top five AMCs saw a growth of 17% in their debt AUM last year. Their AUM in debt funds increased from Rs. 3.51 lakh crore in December 2013 to Rs. 4.10 lakh crore in December 2014.
ICICI Prudential has the highest AUM in debt funds. As on December 2014, its debt book stood at Rs. 93,637 crore, closely followed by HDFC, Reliance and Birla Sun Life.
The national sales head of a foreign fund house said that corporate houses and HNIs which account for majority of the debt fund inflows, prefer the top five AMCs. Typically, these investors attach great importance to the fund size and brand name before investing, he added.
If a large institutional investor has to invest, say, Rs 50 crore in a debt fund, it would not bother with smaller debt schemes and instead would diversify its investment across a few large schemes. In fact, many such investors have internal guidelines setting aside limits on the exposure they can have in individual schemes. Similarly, the strong pedigree of the top fund houses is comforting to them.
Manoj Nagpal of Outlook Asia Capital points out that retail participation has started picking up in debt funds of large fund houses. “Large fund houses have been active for last one year compared to their mid and small-sized counterparts. AMCs like ICICI Prudential, Reliance and Birla Sun Life have been continuously coming out with NFOs which has helped them create visibility.”
“Debt funds which manage large AUM have a low expense ratio. Also, it’s a typical human behavior to invest in a fund where other people have already invested,” said Tanvir Alam of Fincart.
Jimmy Patel, CEO, Quantum MF is of the view that large fund houses pay healthy commissions to increase their AUM. “A few large AMCs are promoting their debt funds by offering higher commissions to distributors in order to increase their assets size. Also, HNIs and corporates prefer to put their money in a fund having a minimum corpus of Rs. 1,000 crore. Large fund size ensures that the fund would not be affected by redemption pressure.”
