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Private MFs Outpace PSUs

Tempo set by private players has left PSUs gasping for breath

The popular trend looks to be shifting, with one-time champions now having to play the part of also-rans.

Private sector players have not only increased their speed in reaching out to customers, they have also raised the limits of their endurance to ensure their performance’s, vis a vis public sector funds, become virtually unmatcheable.

Public sector mutual funds have just not been able to face the challenge, says a report on the industry.

Not long ago, it was the public sector MFs which used to be dominant in the industry – at one time UTI was the master of all that it surveyed in the MF industry. However, quite the opposite is happening as the private sector has come out to compete aggressively.

A look at the data reveals that public sector MFs comprised only 21 per cent of Assets Under Management (AUM) in 2009 which comes to around Rs 1,03,202 crore in comparison to 72 per cent way back in 2001 which registered a sum of Rs 48,573 crore.

The figures gain significance especially after analysts predicted further progress in the MF industry in the coming days provided the pace of economic growth is not just sustained, but also increased. In case of quick economic growth, the pace of growth of MFs could be upped 22-25 per cent and in case the economy grows slowly, then the growth tempo will fall to 15 to18 per cent.

It is not only the growth rate, but even the number of public sector MFs has gone down drastically. A rather disheartening figure reveals that there were around 11, way back in 2001. But now they have come down to just five. Among those that no longer exist are Bank of India, IDBI, IL&FS, GIC, IndBank and PNB.

The main players in the public sector MF segment, as of now, are UTI MF, LICMF and SBI MF, which together control around 20 per cent share of the industry’s total AUM.

Since the non-existing MFs were promoted by banks, the reason behind their folding-up may well be their inability to speedily take to the industrial growth yardstick. Commenting on the habit of many banks engaging themselves in distributing MF products, the report said that they are yet to come up to their potential in this sector. PSU banks with a large captive customer base and significant reach have till now played a not so pivotal role in MF distribution, it added.