As per the latest report released by AMFI, the total commission and expenses paid to 979 Mutual Fund (MF) Distributors year-on-year (y-o-y) grew by a whopping 70% or Rs. 3,533.3 crores in the fiscal year 17-18 to Rs. 8,533.73 crores. This growth in distributor payouts is only around Rs. 1500 crores lesser than the gross payments made to 732 distributors in the whole of 16-17, standing at Rs. 5,000.41 crores!
An MF distributor is essentially the middle-man between the MF Houses and the investors, soliciting new business for the former. They could be broadly categorized as banks, companies, stock brokers, wealth managers, and individuals. These intermediaries charge investors like you a commission of around 1-1.25% per annum in addition to a fixed upfront fee in return for their advisory services. But these fees are hidden from you since they are expressed in the form of the ‘Expense Ratio’ or the cost involved in managing a fund.
The table below indicates the earnings of the top ten mutual fund distributors in 17-18.
|Name of Distributor||Commission & expenses paid in 17-18 (Rs. crores)||Commission & expenses paid in 16-17 (Rs. crores)||Growth %||Change in Top 10 ranking in 17-18 vs 16-17|
|NJ Indiainvest Pvt Ltd||786.77||442.68||78%||No change|
|HDFC Bank Limited||641.39||396.51||62%||No change|
|State Bank of India||557.90||178.79||212%||Improved ranking from 7th to 3rd|
|Axis Bank Limited||537.71||248.53||116%||No change|
|ICICI Bank Limited||470.28||279.68||68%||Fell 2 ranks from 3rd to fifth|
|ICICI Securities Limited||316.53||172.58||83%||Improved 2 ranks from 6th to 8th|
|Kotak Mahindra Bank Limited||274.29||198.67||38%||Dropped 2 ranks from 5th to 7th|
|Citibank N.A||248.96||185.02||35%||Dropped 2 ranks from 6th to 8th|
|Prudent Corporate Advisory Services Ltd||217.82||99.21||120%||
IIFL falls out of the Top 10 to 11th rank
Prudent CAS Ltd. improves its rank from 12th to 9th
|Standard Chartered Bank||185.42||119.53||55%||No change|
The top ten distributors earned Rs. 4,237.08 crores and banks occupied eight of these positions. SBI and Axis saw more than 200% and 100% rise respectively in their y-o-y commissions, with HDFC earning the most at Rs. 641.39 crores in 17-18. Neeraj Choksi and Jignesh Desai led brokerage firm, NJ Indiainvest Pvt Ltd sits at the top of the list. Prudent Corporate Advisory Services Ltd is the only other non-bank distributor amongst the top 10 improving its position from 12 th last year to 9 th this year.
Individuals as MF Distributors or Agents also did extremely well for themselves with Gaurav Ganpule (Rs 8.43 crore), Ganesh Shridhar Shanbhag (Rs 7.43 crore), Padam Singh Raj Purohit (Rs 6.82 crore) being the top three payees.
Comparing the distributor earnings to the mutual fund investments
The successful ‘Mutual Fund Sahi Hai’ campaign launched early last year resulted in the mutual fund investor folios across 42 fund houses increasing from 5.5 crores to 7.1 crores with a growth rate of 29% in the previous year. A folio number is a unique number associated with an individual investor account, though an investor could have numerous such accounts. Greater awareness saw approximately around 32 lakh new investors putting their money in mutual funds during the previous fiscal, primarily through the Systematic Investment Plan or SIP route. A large percentage of these new investors belonged to smaller towns.
The increased investments saw a healthy growth rate of 26% (Rs. 4.75 lakh crores) in the Assets Under Management (AUM, i.e. the total market value of all the financial assets managed on behalf of clients) of the Mutual Fund industry. The assets rose from Rs. 18.3 lakh crores in 17-18 to Rs. 23.05 lakh crores in 16-17. In the table below, we have enlisted the AUM for the top 10 Mutual Fund houses.
AUM as on March 2018
AUM as on March 2017
|Change in %|
|ICICI Prudential Mutual Fund||305,739||242,961||26%|
|HDFC Mutual Fund||300,549||237,178||27%|
|Aditya Birla Sun Life Mutual Fund||247,530||195,050||27%|
|Reliance Mutual Fund||244,904||210,891||16%|
|SBI Mutual Fund||217,650||157,025||39%|
|UTI Mutual Fund||154,940||136,810||13%|
|Kotak Mahindra Mutual Fund||124,691||92,216||35%|
|Franklin Templeton Mutual Fund||103,152||81,615||26%|
|DSP BlackRock Mutual Fund||86,326||65,199||32%|
|Axis Mutual Fund||77,325||57,700||34%|
With the majority of the positions belonging to banks again, they seem to be the biggest winners in the mutual fund game. SBI Mutual Fund’s AUM stood at Rs. 217,650 crores, and saw the sharpest growth rate in the list with 39% growth y-o-y. The growth rate for SBI is modest as compared to its double century growth rate in the distributor rankings.
From the above statistics, it is clear that the distributor earnings have risen more than proportionately to the mutual fund assets across the industry.
Commissions are eating into your hard-earned mutual fund returns
Did you know that since a Mutual Fund distributor charges his commission as a percentage of your returns, his earnings increase along with yours! More volatile funds also attract more commission. That’s right- because they convinced the investor to buy the risky funds! Distributors also get rewarded with a higher commission for scouting investors in the ‘beyond top 30 cities’ (smaller cities) as compared to what the distributors in the top 30 cities get.
Vested interests are bound to lead the mutual fund distributors to convince investors like you to purchase those products that would get them, and not necessarily you, the highest returns.
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manoharPosted at 15:12h, 08 July
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