Efforts by SEBI and fund houses to drive wider penetration of fund products are paying off. According to AMFI data, 24 per cent of the industry's retail assets originated from B-15 cities at the end of April 2016. In April 2015, this share was 23 per cent.
T15 refers to the top 15 geographical locations in India and B15 refers to cities beyond them. According to industry sources, the T-15 cities are Ahmedabad, Bangalore, Baroda, Chandigarh, Chennai, Hyderabad, Jaipur, Kanpur, Kolkata, Lucknow, Mumbai (including suburbs), New Delhi ( including NCR ), Panaji, Pune & Surat.
B-15 boost
It was in September of 2012 that the SEBI first initiated measures to boost the B-15 penetration after holding a series of meetings with various stakeholders in the mutual fund industry. The Mutual Fund Advisory Committee (MFAC) also offered its recommendations. With the SEBI Board's approval, the regulator allowed MF schemes to charge an additional Total Expense Ratio (TER) upto 30 basis points on the daily net assets of the scheme if the new inflows from beyond top 15 cities are at least (a) 30% of gross new inflows in the scheme or (b) 15% of the average assets under management (year to date) of the scheme, whichever was higher. It is this initiative which has seen B15 collections rise.
It is clear that it is distributors who have played a big role in furthering MF penetration in B-15 locations. According to AMFI data, the share of individual investors in equity oriented schemes from B-15 distributors is higher than T-15 locations. Direct investments from B-15 locations in such schemes are also miniscule compared to the growing share of direct plans in T-15 locations. It is only in Exchange Traded Funds and Fund of Funds that B-15 individual investors, like their peers in T-15, prefer to go direct!
The Indian mutual fund industry is one of the fastest growing and most competitive segments of the financial sector. However, growth rates of AMCs have come down from the peak levels seen in the early 2000s. One of the biggest reasons behind this was the lack of wider retail participation.
The lack of penetration was attributed both to low awareness of mutual funds from the public outside the major (T-15) cities and also the lack of AMC presence outside the major cities. But if recent data is anything to go by, things are changing.
Upping the game
For one, the share of B-15 locations in overall industry assets is rising. As much as 16 per cent of the assets of mutual fund industry came from B-15 locations in April 2016, in absolute terms, ₹2.24 lakh crore.
This is up from ₹1.89 lakh crore in April 2015, suggesting a 18.7 per cent growth in B-15 assets as compared to the overall asset growth of 15.3 per cent. Buoyant inflow in liquid, income, equity and balanced funds helped the mutual fund industry grow its assets under management (AUM) to a record ₹14.22 lakh crore in April.
Better balance
Two, B-15 assets are equally split between equity and non-equity assets. Exactly 50 per cent of the assets from B-15 locations were in equity schemes at the end of April 2016. The B-15 appetite for equities seems to be higher than that in top 15 cities. In T-15 locations equity oriented schemes accounted for just 28 per cent of assets at April-end this year. This is mainly due to the fact that T-15 locations are the headquarters of large institutions who park a lot of treasury money in debt funds.
Only about 10 per cent of institutional assets come from B-15 locations. Individual investors primarily hold equity-oriented schemes while institutions hold liquid and debt oriented schemes.
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