Indian mutual fund (MF) retail investors do not appear to be rushing to shift their investments in equity related schemes to direct plans to save on distribution costs, not yet at least.
However, institutional investors, who predominantly park their investments in debt funds have taken to direct plan, probably because with the size of their investment being large even marginal saving in cost would work to be substantial.
According to a CRISIL Report, the average assets under management (AAUM) of direct plans was about 15% of the total MF industry’s AUM at the end of March 3, 2013.
A random analysis of the scheme-wise asset base of some of the popular equity schemes of 3 of the top MF houses - HDFC MF, ICICI Prudential MF and Franklin Templeton MF - shows that to a large extent investors have stuck to their present mode of investment in them. However, this is not to generalise that the experience of the entire industry might be similar.
In fact, even among these three, Franklin Bluechip Fund has seen a significant asset flow into its direct plan. To a lesser extent, this was true of HDFC Equity Fund whose direct plan (Growth) also has sizeable corpus.
HDFC MF’s Top 200 Fund, with a total corpus of nearly Rs. 12,015 crore, is probably the single largest equity MF scheme in India. While the regular plan’s growth option had a corpus of Rs. 8,525.72 crore, the fund size of the dividend option was. Rs 3,433.08 crore. However, the corpus of dividend option under direct plan was Rs. 12.92 crore, while its growth option had Rs. 45.13 crore in assets.
MF Direct Plans Growth...!
AMC Total AUM Rs. Cr % of AUM
ICICI Pru. AMC 12,983.00 15.10
Reliance Capital AMC 10,984.00 11.50
UTI AMC 10,863.00 16.20
Birla Sun Life AMC 9,388.00 12.60
SBI Funds Management 8,059.00 14.70
HDFC AMC 7,416.00 7.30
Kotak Mahindra AMC 6,064.00 17.30
JP Mogan AMC 5,006.00 32.60
IDFC AMC 4,706.00 16.30
Religare AMC 4,486.00 31.90
This trend was noticeable under other schemes of HDFC MF - HDFC Prudence Fund, Mid Cap Opportunities Fund, HDFC Growth Fund and HDFC Tax Saver too.
In ICICI Prudential MF’s Balanced Fund & Focused Bluechip schemes also investors appear to be content with the existing mode. While the Balanced Fund’s regular plan dividend option had a corpus of Rs. 159.72 crore, the size of the growth option was Rs. 286.95 crore. But under the direct plan, the figures are Rs. 17.38 lakh and Rs. 64.74 lakh only.
Franklin India Prima & Prima Plus both continued to have sizeable corpus under the regular plans. While Prima Plus fund’s dividend option was of Rs. 1,025.41 crore in size, the growth option had a corpus of Rs. 922.06 crore. But the direct plan under both options had only a small corpus of Rs 1.66 crore and Rs. 3.51 crore respectively.
It was only Franklin’s flagship scheme Bluechip Fund which showed a different picture. As against Bluechip Fund’s corpus of Rs. 1,723.46 crore (Dividend options) and Rs. 2,588.75 crore, the direct plan had many votaries as its corpus showed Rs. 829.66 crore in assets.
But, assets of dividend option was modest at Rs. 8.29 crore, implying that long-term investors, who were looking to benefit from compounding effect, were conscious of even small saving in annual fee pushing up the fund NAV.
But it may be a little too early to assess the impact of the launch of the direct plan as it was introduced only from January 1, 2013. With all things being equal between regular and direct plans, the latter would have lower expense ratio excluding distribution expenses, commission etc & no commission would be charged.
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