Direct plans of equity funds are steadily getting popular among retail investors. Retail investors share in direct plans of equity funds is more than that of institutions and HNIs. Retail investor’s participation in direct equity AAUM is almost half of the total average equity AUM in direct plans.
An analysis of direct plan equity AAUM of top 10 AMCs (sponsor contribution was excluded) shows that 48% of direct plan equity AAUM as on March 2015 is retail. Retail investors have poured in Rs.15,125 crore in equity mutual funds through direct plans. The total direct plan equity AAUM of top 10 fund houses stands at Rs. 31,494 crore as on March 2015.
There could be two reasons for this increase in retail participation in direct equity assets. Firstly, the AAUM of equity funds has gone up due to mark to market gains. The BSE Sensex was up 25% in FY 2014-15. Secondly, the appetite for direct plans has increased among retail investors.
Low expense ratio and ease of transaction in direct plans through web channel has contributed to the increase in direct plan equity AUM, say fund officials. Distributors say that a few fund houses have promoted direct plans by slashing TER considerably and by distributing dividends.
Among the top ten fund houses, UTI has the highest proportion of retail share in direct plans of equity funds. Of Rs.10,162 crore of equity assets in direct plan as on March 2015, Rs.8,900 crore or 88% consisted of retail direct AAUM. In its clarification sent to Cafemutual earlier, UTI said that the data also includes investments of historical AUM of invalid ARNs and wrong ARNs which exists prior to introduction of direct plan. The fund house claimed that total equity sales under direct plan since the introduction of direct plan stood at Rs.881.96 crore (as on December 2014).
This was followed by SBI which has retail participation of Rs.1,536 crore or 74% of total AAUM of direct plan in equity funds.
Other fund houses having over Rs.1,000 crore in equity funds through direct plans are HDFC and Reliance.
Majority of large fund houses like HDFC, ICICI Prudential, Reliance, Birla Sun Life, DSP BlackRock and Franklin Templeton have over 20% of equity assets in direct plans coming from retail investors.
The study shows that HNIs have invested Rs.7,712 crore or 25% in equity funds through direct plans while institutional investors like companies, banks and FIIs poured in Rs.8,657 crore or 27% of total equity AUM in direct plan as on March 2015.
The study has excluded the contribution of sponsors and associates in equity funds through direct plan.
Direct plans were introduced in January 2013. The equity AUM has grown by over Rs. 1.54 lakh crore i.e. from Rs. 1.91 lakh crore as on December 2012 to Rs. 3.45 lakh crore in March 2015. Of this Rs. 1.54 lakh crore, Rs. 53,693 crore (including Rs.16,557 crore of sponsors contribution) was invested in equity mutual fund through direct plans in less than 2 years’ time. By factoring in mark to market appreciation, it would be right to assume that a major chunk of money has come through the direct route.
