MF assets from smaller cities see encouraging growth

India's smaller cities and towns, known as Beyond-15 (B15) cities in mutual fund sector's parlance, have emerged as a sizeable contributor to the mutual fund assets over the past two years.

Buoyed by special incentives from the market regulator, the Securities and Exchange Board of India (Sebi), B-15 towns have become the focal point for several mutual fund houses. As of December 2015, the total assets under management (AUM) from B-15 centres stood at Rs 2.16 lakh crore, nearly one-fifth of assets from top 15 cities. A year ago, the B15 AUM had stood at Rs 1.89 lakh crore. The investor accounts from these centres have increased by nearly five million to 23 million.

In September 2013, Sebi allowed fund houses to charge an extra 30 basis points in expense ratio if inflows from B-15 cities were around 30 per cent of the total flows. According to industry players, this move by Sebi has yielded results with the pace of growth in investor accounts surpassing that from top cities.

Further, as data from Association of Mutual Funds in India show, B-15 locations have a better balance of equity and non-equity assets. Nearly 50 per cent of the assets from B-15 cities are in equity schemes.

However, industry executives are now worried that soon, they might not see a continuation of such extra commissions as the regulator tightens the fist around commissions paid to distributors.

Industry players' concerns stem from the Sumit Bose panel recommendations on financial products issued last year. The committee had come down heavily on up-front commissions and extra commission paid on assets garnered from smaller towns.

"The extra commission in B-15 should be removed and a level-playing field be created in the country. Manufacturers and distributors should on their own tap such unexplored markets to increase their sales and market share," the Bose panel said in the report.

SIZEABLE CONTRIBUTION

• 16% of the assets of the MF sector came from smaller cities in January
   
• Rs 2.16 lakh crore Total assets under management from smaller cities as of December 2015
  

 

15.2% rate of growth in assets of smaller cities in January
 

49% of the assets from smaller cities are in equity schemes
 

23% of individual assets are from smaller cities