Direct plans of mutual funds have been steadily gaining market share. These plans accounted for nearly 40 per cent of the money managed by mutual funds during the December 2016 quarter. That’s up from 35 per cent in the December 2015 quarter.
Their share now is more than twice the 15 per cent share in the March 2013 quarter, when direct plans were introduced, reveal data from industry association AMFI and rating agency Crisil. Ergo: mutual fund investors are increasingly buying directly from fund houses and not through distributors. With good reason: direct plans give better bang for the buck than regular plans, as they help save on the commission paid to intermediaries.
This reduces the expense ratio and improves returns. The savings in the expense ratio — that can exceed 0.5 per cent of the net asset value (NAV) in debt funds and 1 per cent in equity funds — can compound into tidy gains for direct plans over the long term. For instance, in the case of the ICICI Prudential Focused Bluechip Fund, the annualised return over three years in the direct plan is 20.14 per cent compared with 19.04 per cent in the regular plan.
