Market leaders swap positions in terms of assets, profits.
In an interesting turn of events, the two leaders in the mutual fund sector have swapped positions. For four-and-a-half years, there was a single market leader in assets, Reliance Mutual Fund. In the quarter ended September, HDFC MF took that slot. The latter, however, has yielded the slot of the most profitable asset management company to Reliance MF.
The chief executive officers (CEOs) of both asset management companies, which control over a fourth of the industry's overall assets, seemed unconcerned with the latest numbers. Both Reliance AMC's Sundeep Sikka and HDFC's Milind Barve maintained that assets were important but that could not be the only factor. Both said the concept of MFs had to be expanded a lot more. “The top position is nothing to rejoice. The industry needs to aim for deeper penetration and increase the investors' base,” said Barve.
| HOW THEY COMPARE Rise of assets in different categories in the first half | |||
| 31-Mar | 30-Sep | Change (%) | |
| HDFC MF | |||
| Equity | 27,896.54 | 30,038.22 | 7.67 |
| Debt | 40,795.39 | 44,286.23 | 8.55 |
| Hybrid | 17,283.39 | 17,160 | -0.72 |
| Commodities | 306.89 | 342.05 | 11.45 |
| Total assets | 86282.24 | 91,827.11 | 6.42 |
| RELIANCE MF | |||
| Equity | 32,598.68 | 29,524.77 | -9.43 |
| Debt | 58,545.60 | 50,989.22 | -12.91 |
| Hybrid | 9,997.94 | 8,224.72 | -17.74 |
| Commodities | 575.73 | 3,401.55 | 490.82 |
| Total assets | 101,576.60 | 90,660.60 | -10.75 |
| All figures in Rs crore Source : Value Research & Amfi | |||
Sikka said: “As a part of our strategy, we are focused on adding more retail investors, not only in equity but also in the debt side of the business. The quality of assets and profitability are important to us. There is nothing to bother about if we are no more number one in assets.” In folios, a measure of individual investors, Reliance MF has 7.2 million, about three million more than HDFC’s 4.2 million.
Going ahead, experts are betting on HDFC. The reason is performance. Dhruva Chatterji, senior research analyst at fund tracker MorningStar India, said: “HDFC MF seems to have gained because of a rise in its equity assets. Its flagship schemes have been doing well, while some of the top schemes of Reliance MF have not done so well.”
If one considers the rise in equity and debt assets in the first half of the current financial year and despite weak market conditions, HDFC MF’s equity assets have grown at eight per cent, whereas Reliance MF has lost 13 per cent.
Reliance MF says it has been concentrating on building debt assets. “Our focus is to shift from institutional debt to retail debt. Already, we have two million systematic investment plans in our debt category,” said Sikka. He adds that the factor which reduced Reliance's assets by over Rs 10,000 crore in the September quarter was mainly the institutional money going out.
Dhirendra Kumar, chief executive officer of fund tracker Value Research, says: “Investors' affiliation and attitude is likely to be favourable towards HDFC MF. The fund house will not find it hard to prevail with its top position.” He said HDFC's performance gave it the ‘pull’ factor. On the other hand, Reliance MF's schemes have been underperforming.
The assets in HDFC's equity schemes show this. HDFC's five largest schemes make up 63 per cent of its overall assets, while Reliance's top five funds contribute only 42 per cent of its assets under management. Two equity schemes are among the investors' most favoured schemes -- HDFC Top 200 and HDFC Equity. Put together, both have assets a little over Rs 20,000 crore.
On the other hand, only one equity scheme of Reliance has made up to its top five, Reliance Growth, with assets worth Rs 6,275 crore.
The change at the top has come at a time when the fund market is still struggling to ensure reasonable penetration in the Indian market. The Indian fund industry is one of the most under-penetrated financial service markets, with an investor base of less than four per cent of the country’s population. In fact, considering the duplication of folios, the penetration could be further squeezed down to less than three per cent.
