Investors route Rs. 33,830 crore into direct plans in the first month raising concerns among MF agents..!
Many Indian companies & financial institutions are investing directly in MFs (mutual funds) under Direct Plans or / DP, a scheme allowed by the market regulator Securities Board of India (SEBI), from January leaving the mutual fund distributors in the lurch.
DPs allow investors to save anywhere between 0.5% points and 0.75% of the money they invest in mutual fund or / otherwise paid as commission to distributors.
In January 2013, investors routed Rs. 33,830 crore, or 85 per cent of the incremental. Rs. 39,611 crore, into mutual funds through DPs under the direct plan, a move which raised concerns that the distributors or / financial planners will be wiped out.In a non-direct plan routed through distributors / or financial advisors,commission is deducted from the NAV (net asset value).T
AUM of Direct Plans Rs. 1.75 lakh..!
The AUM (asset under management) of direct plans has risen to Rs. 1.75 lakh crore,or / 21% of the total asset under management, during the end of January 2013, data by Accord Fintech, a mutual fund database provider shows.
ICICI Prudential AMC lead the chart with an AUM of Rs. 18,063 crore followed by UTI AMC and SBI with Rs. 12,859 crore and Rs. 12,340 crore, respectively.
Mr. Vinay Agrawal, ED & Chief Strategy Officer, Angel Broking said, '' Many banks and firms with treasury operations which are the traditional large investors in mutual funds have invested directly to earn higher returns. In large banks and corporate treasuries, the cost of keeping manpower for investment will prove economical in the current scenario of direct investment resulting in elimination of intermediaries"
Mr.K. Ramanathan,CIO & ED, ING Mutual Fund, said,' 'The decision of such big investors who regularly park surplus funds in liquid mutual fund schemes is a major cause of worry for all the mutual fund distributors. Distributors could be impacted by investors shifting to the direct plans, but here it is important to remember that it would be those (distributors) with large institutional folios, particularly in fixed income"
But, given the lack of knowledge on MF products and asset allocation, one will have to wait & see whether a significant shift to direct plans happens among retail and rich clients.
Last year, SEBI directed every mutual fund & scheme to have a direct plan for investors who do not want distributor support & asked MFs to give the net asset values of such plans separately.
MF distributors, who were already pinched by slim margins & rising cost of research, will now be forced to shut shops as more investors switch to DPs.
In 2009, market requlator allowed distributors from charging commission from investors and instead asked mutual funds to pay commission, a move that forced above 1 lakh distributors or / advitosrs to shit shop or / switch to other business.
Mr. Vinay Agrawal of Angel Broking added, ''The Direct Plan introduced by the AMC has lower expense ratio resulting into a slightly better NAV. Though this is investor friendly but, will wipe out the small distributor completely''
'' Big corporates or / institutions have decided to invest directly without the help of an intermediary as they have their own research team in place" said Mr. Dhirendra Kumar, CEO, Value Research online".
Src: ET
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