HDFC, Nippon, ICICI hoist the folio trophy as 40 funds chase finish line

Folio growth powered by stellar performance and strategic distribution

Four mutual fund (MF) houses — HDFC, Nippon India, ICICI Prudential, and Quant — have added more investment accounts, or folios, in the past year than the combined total of the remaining 40 fund houses.

These four fund houses, whose equity and hybrid schemes have been among the top offerings in the returns chart in recent years, added a net total of 23.3 million folios during the August 2023–July 2024 period. This represents 51 per cent of the net folio additions industrywide.

Their schemes’ dominance in categories with the highest investor interest, such as smallcap, midcap, and thematic funds, has also contributed to their large share of new investment accounts.

For example, in the smallcap category, Nippon and Quant have been top performers over the past three and five years, while HDFC MF’s schemes have consistently ranked among the top in midcap, flexicap, and balanced advantage categories. The fund house also saw strong investor interest in its new thematic offerings.

In addition to performance, their large asset sizes, distribution strength, and brand recognition have likely contributed to their folio growth.

Saugata Chatterjee, chief business officer at Nippon India MF, highlighted the fund house’s efforts to expand its reach. “These include extensive investor awareness programmes in Tier-II and Tier-III cities and partnerships with digital platforms to attract digitally savvy youth,” he said, also noting the role of MF distributors in this growth.

In contrast, only two fund houses — Axis and PGIM India — saw their folio counts shrink over the past year.

Past returns are a crucial factor in fund selection, particularly in the active equity fund space. While direct plan investors often rely solely on past performance, advisors also consider historical returns when recommending schemes to clients.

However, experts caution against relying exclusively on past returns, citing the volatility of performance metrics.

“Equity funds go through cycles where different investment styles, market capitalisation segments, sectors, and geographies perform well at different times. Therefore, basing fund selection solely on past returns is not advisable over the long term,” said Jiral Mehta, senior research analyst at FundsIndia.

She advised investors to also consider factors such as performance consistency, investment philosophy, risk management, and the track record of fund managers.

A recent FundsIndia report highlighted that a fund ranked 160 based on its 2018-2020 performance emerged as the top performer in the three-year returns chart by the end of 2023.