MF investors bypass distributors

After institutional investors, HNIs also likely to follow

More investors are bypassing distributors while putting money into mutual fund schemes, compared to early 2013. Almost a third of the MF sector’s total of assets under management (AUM), of close to Rs 900,000 crore as on December 31, have been invested directly by unit holders. This is almost double of what it was in March 2013.

This  is likely to have gone up further since, say experts, who say the trend for the direct route is distinctly north. According to Niranjan Risbood, director (fund research), Morningstar India: “The lower expenses in direct plans has been a key reason for the rise of investments into direct plans. The 30-50 basis points of lower expenses add to the returns of investors. Currently, it is largely the corporate/institutional investors which are investing through direct plans. We could see increasing participation from the high net worth and ultra high net worth segment, once they see the benefits in the form of higher returns,” he said.

Direct plans, introduced in January 2013 to give investors a cheaper option for investing in MF schemes, account for 29.8 per cent of the sector’s AUM, nearly double from 15.4 per cent in March 2013.  Investors have put in Rs 2.6 lakh crore or roughly a third of the sector’s total AUM through direct plans, according to data from fund tracker Value Research, as of the end of the December quarter.

Saurabh Nanavati, managing director and chief executive officer of Religare Invesco Asset Management Company, said sophisticated institutional investors had been the practice’s first adopters. “It makes sense for informed investors since the schemes have lower expense ratios because of which they would benefit. It has largely been seen in liquid schemes and other debt funds so far,” he said.

Nearly half the assets under a direct plan are from liquid funds. They accounted for Rs 1.29 lakh crore of the Rs 2.63 lakh crore of direct assets. The next highest have been fixed maturity plans, which account for Rs 59,483 crore. Short-term, ultra short-term and income funds account for Rs 13,000 crore to Rs 35,000 crore.

V Ramesh, deputy chief executive officer of the Association of Mutual Funds in India, said it was largely bulk investments which had come through the direct route. Smaller investors were unlikely to adopt it in a hurry. “The retail segment will still need guidance, support and help. It is unlikely that they will go the direct route too soon,” he said.

Equity funds, largely seen as a retail product, have a total of Rs 4,206.6 crore coming in through the direct route or 2.4 per cent of the Rs 1.72 lakh crore of total equity assets with MFs.