The permission to charge an additional 30 basis points (bps)
as total expense ratio (TER) on sales beyond the top 15 cities may look
attractive, but mutual fund industry executives have taken it with a pinch of
salt.
“It’s an uphill task which demands concerted and sustained
efforts,” say officials.
In its statement, the Securities and Exchange Board of India
(Sebi) had said: “AMCs (asset management companies) will be able to charge 30
bps if the new inflows from these cities/ towns are minimum 30 per cent of the
total inflows. In case of lesser inflows the proportionate amount will be
allowed as additional TER.”
Barring a few top fund houses, most others do not enjoy
widespread presence outside the top 10 cities. Moreover, according to the
latest statistics, close to three-fourths of the overall industry’s assets pour
in from the top five cities—Mumbai, Delhi, Bangalore, Kolkata and Chennai. And
after including the next top 10 cities, the industry gets a whopping 87 per
cent of its assets. (see table)
A day after Sebi made its announcements, industry executives
said this was no big relief for the industry. Rather, they term measures
“half-baked”.
According to Akshay Gupta, chief executive officer, Peerless
MF: “Arguably, they (Sebi) could have done better. Present situation warrants
well-defined steps to revive the sagging fortunes of the industry.”
Executives told Business Standard it was unlikely that fund
houses immediately start opening branches or point of sales across the country
to “push” mutual fund products. Potential investors in small towns are still
interested in real estate and gold, they say. “What we can do is leverage on
our tie-ups with national distributors, mainly banks. Fund houses may go ahead
for tie-ups with banks to strengthen their distribution channels,” explained
the chief marketing officer of a mid-sized fund house.
Jaideep Bhattacharya, managing director, Baroda Pioneer MF,
says: “It’s not going to be easy going beyond the top 15 cities. It will take
time as the industry needs to build up infrastructure and distribution
networks, which require concerted efforts and continuous investor awareness. To
start with, one may not have volumes, but the important factor is money inflow
from the hinterland is stickier.”
Source: http://www.business-standard.com/india/news/garnering-30-assetssmaller-citiestough-task-say-mfs/483578/
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