Equity mutual fund SIPs boost distributors' income; AUM rise modest

Revenue from commissions saw double-digit growth in FY23

The rising popularity of equity mutual fund (MF) investing via the systematic investment plan (SIP) route led to double-digit revenue growth for MF distributors during 2022-23 (FY23), even as the industry’s overall assets under management (AUM) saw a modest 5 per cent rise.

During FY23, the top 1,700 distributors, who account for around 60 per cent of the regular AUM of the industry, raked in Rs 12,000 crore as gross commissions. This is 16 per cent higher than the total payout of Rs 10,400 crore they received in financial year 2021-22 (FY22).

During the same time, total assets of clients in MF schemes rose just 8.5 per cent to Rs 14.7 trillion.

According to MF officials, the commission payouts outpaced the asset growth as the asset mix of MF distributors is increasingly moving towards higher-paying equity schemes at the expense of debt funds. 

“There are several factors — with prominence of equity investment and rising SIP inflows being the primary drivers. The fact that equity schemes see larger mark-to-market gains vis-a-vis debt plans also aided growth in equity assets of distributors,” said Sirshendu Basu, product head at Bandhan Mutual Fund. Owing to the strong SIP inflows into equity schemes in FY23, the share 

of active equity schemes in the total MF AUM rose to 37 per cent from 35 per cent a year ago, shows a report by Bandhan MF. While investors pumped in a net Rs 1.4 trillion into active equity schemes in FY23, they pulled out Rs 1.6 trillion from debt schemes, according to the report.

NJ IndiaInvest continues to sit at the top of the MF distributors’ list with gross commission income of Rs 1,540 crore. It is followed by State Bank of India (SBI), which saw its commission income rise 23 per cent year-on-year (Y-o-Y) to Rs 905 crore.

HDFC Bank, Prudent Corporate Advisory and Axis Bank were the other names in the top five.

NJ and Prudent follow the sub-broking model, wherein they tie up with individual distributors on a revenue-sharing basis. The Association of Mutual Funds in India (Amfi) releases MF commission data of only the top 1,500-1,700 distributors. There are around 100,000 active MF distributors in the country.

MF distributors, who have been facing strong competition from online platforms, were able to outpace their direct peers on the SIP growth front in calendar year 2022.

The Y-o-Y growth in SIP registrations through direct plans came in at just 4.5 per cent in 2022. This compares to 115 per cent growth in 2021 and 505 per cent in 2020. In comparison, SIP registrations via regular plans rose 19 per cent last year.

The surging retail flows through the SIP route boosted individual investors’ holding in the MF industry’s total AUM.

A recent analysis showed that retail investors and high net worth individuals together accounted for more than 60 per cent share in the mutual fund industry’s assets in 2022-23. This is the highest since records began in 2009-10.