Nearly one-tenth of top mutual fund assets come from related distributors

Associate distributors have provided stickier assets to some of India’s largest mutual fund houses even as troubles in debt schemes have prompted withdrawals leading to an erosion in the amount of money they manage.

The share of such distributors has actually gone up since the Covid-19 crisis took hold in March. It continued to hold even after the panic withdrawals prompted by Franklin Templeton’s decision to wind up six debt schemes over debt market troubles, shows an analysis of data from the Association of in India (AMFI).

The share of such distributors for the five largest asset managers was around 9.2 per cent at the end of 2019. It rose to 9.5 per cent in March when the lockdown began, and was at 9.4 per cent at the end of April after Franklin decided to wind up its schemes leading to withdrawals from many debt schemes.

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Associate distributor assets would include a bank which sells its own mutual fund to customers. Three of the top five mutual fund houses are backed by banks. These include SBI Mutual Fund, HDFC Mutual Fund and ICICI Prudential Mutual Fund. They had an average of 12.5 per cent of assets coming in from associate distributors. It is significantly lower for asset manager not backed by banks. For example, the figure is just under 2 per cent for Aditya Birla Sun Life Mutual Fund. It is 0 per cent for Nippon India Mutual Fund.

Sundeep Sikka​, executive director and chief executive officer, Nippon Life India Asset Management Limited said that garnering assets using group entities was not a problem as long as there was no conflict involved and the interests of customers were kept in mind.

Emails sent to the remaining fund houses on Tuesday did not elicit a response.

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SBI Mutual Fund has the largest share, with nearly 23.7 per cent of total assets coming from associate distributors. It is 5.3 per cent for HDFC Mutual Fund and 8.5 per cent for ICICI Prudential Mutual Fund.

Ramanathan Krishnamoorthy, founder and chief executive officer of Spectrum Wealth Solutions, said that some assets garnered from group companies was not a problem as long as funds were performing well. “It is not unhealthy,” he said.

The top five had seen a significant decline in assets as equity tanked and debt funds saw withdrawals. The total assets dropped from Rs 15.7 trillion in December 2019 to Rs 13.8 trillion in April 2020.