Direct plans form 25% of total AUM of MF industry: Crisil

Says direct plan route is increasingly attracting large investors, especially to debt fund schemes

Direct plans in the mutual fund industry now constitute 25% of total assets under management (AUM), up from 15% in the previous quarter, a report by Crisil Research said.

Direct plan, launched in January 2013 as per Sebi direction, provides an option to investors to subscribe to various mutual fund schemes directly without the help of any distributor or agent.

The rating agency said the direct plan route is increasingly attracting large investors, especially to debt fund schemes.

"The average AUM of direct plans offered by mutual funds rose by almost 70% to Rs 2.14 lakh crore during the June quarter from Rs 1.27 lakh crore in the March quarter debt-oriented mutual funds constitute 98% of the total AUM under direct plans," the report said.

As per the report, within debt category, liquid and ultra short-term debt funds were the highest contributors to the AUM of direct plans.

While AUM of direct plans of liquid funds rose by Rs 24,400 crore to cross Rs 1 lakh crore mark as of June, AUM of ultra short-term funds increased by Rs 16,200 crore to Rs 35,900 crore as of the latest quarter.

"The rise in AUM of direct plans in these categories is the outcome of more institutional investors (who dominate the category) shifting to less expensive plans," it said.

According to the research report, direct plans also help in increasing the returns from plans due to less expense ratio.

"Higher returns from direct plans are an outcome of lower expense ratio for these plans as distribution costs are excluded. In future, more institutional investors and high net worth individuals are likely to shift to direct plans as these investors are far more capable at taking informed investment decisions," Sandeep Sabharwal, Senior Director-Capital Markets at Crisil Research, said.

Retail investors may also start shifting to these plans as awareness about their benefits increases, he said.