Indian Mutual Fund (MF) houses are likely to focus on the outsourced distribution model in their efforts to reach out to customers beyond the top 15 cities. The aim will be to minimise costs as they test the viability of selling mutual fund products in smaller cities.
Share market MF sector regulator SEBI, in its recent guidelines, had said that it would simplify the distributors’ registration process & allow postal agents, retired bank & government officials and retired teachers to distribute simple products.
Experts believe that fund houses will be keen on tapping these persons to push the MF products.
Firms with a pan India presence will have an advantage in expanding beyond the top 15 cities, feel industry analysts
Bank sponsored MF houses will be the biggest beneficiaries. Banks, especially in the private sectors, can better leverage their network to sell MF products in these regions. But what remains to be seen is how PSU banks are able to leverage this advantage.
It could take at minimum one year for the MFhouses to establish a viable business model in the smaller towns.
The top 5 cities contributed over 73% of the total AUM of the MF industry, with Mumbai accounting for more than 44.48 per cent according to AMFI.
As per SEBI’s new guidelines, AMC (Asset Management Companies) will be able to charge 0. 30% additional expense ratio if the new inflows from beyond the top 15 cities add up to at least 30 per cent of total inflows.
Indian mutual fund houses are often criticised for not reaching out to the hinterland & only focusing on the top tier cities. Now, the top 5 cities - Mumbai, New Delhi, Bangalore, Chennai & Kolkata account for 73% of the industry’s total assets.
Cities Contribution to total AUM *
Mumbai 44.48 %
New Delhi 13 .76%
Bangalore 5.43 %
Kolkata 5.33 %
Chennai 4.66 %
Pune 3.45 %
Ahmedabad 3.18 %
Hyderadab 2.13 %
Panaji 0.85 %
Vadodara 0.74 %
Surat 0.68 %
Jaipur 0.61 %
Lucknow 0.58 %
Kanpur 0.54 %
Chandigarh 0.53 %
* Data as on March 31, 2012
Source: AMFI ( Association of Mutual Funds in India)
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