By the end of this month, it would be two years since the market regulator Sebi banned entry loads on mutual fund schemes. Ever since, FE study shows, bank-sponsored MFs, particularly those floated by domestic banks, have coped better with the no-load regime than the rest.
Market participants say that with distributors shying away from selling equity MFs due to lack of adequate compensation, parent banks with large branch networks have helped attract more investors for their asset management arm. Puneet Chaddha, CEO of HSBC MF says, ?I don’t think there might be any major reason for domestic bank sponsored MFs to do relatively well in sales apart from the fact that they have a larger reach.?
According to industry estimates, on an average 50-60% of equity funds of a bank-sponsored MF is sold through its parent bank and the rest through other distributors. Bank-sponsored MFs are asset management business owned by a bank.?Bulk of our sales happen though our parent bank? says Rajan Krishnan, CEO of Baroda Pioneer MF, a unit of Bank of Baroda with over 3,400 branches.
HDFC MF which had equity assets of over 16,500 crore on July 2009 saw its assets growing to R29,800 crore as on June 2011, a surge of over 80% while that for Canara Robeco MF grew 133% to R1,300 crore against R573 crore in July 2009. In contrast, equity assets fell for JM MF (55.6%), JPMorgan (24.8%), LIC Nomura (31%) and Tata MF (12.3%). This is despite the fact that equity market as measured by Sensex surged 24% post entry load ban.
Karan Datta, national sales head at Axis MF says, ?Banks have large investor base. So it’s an added advantage if a fund house is bank-sponsored.? Axis MF which had around R700 crore of equity assets as on January 2010 have seen its assets grow 42% to R1,000. Axis bank currently has over 1,400 branches out of which over 1,100 branches are selling products of Axis MFs, he said. Kotak Mahindra MF remained an exception though among domestic bank sponsored MFs as it saw a fall in equity assets in the last two years.
Also, foreign bank-sponsored MFs like HSBC MF and Deutsche MF with lack of sufficient reach have seen their equity assets fall post banning of entry loads. More banks are jumping on the MF bandwagon and getting into asset management as they are better equipped to do more sales, say market players. Recently, Union Bank along with KBC started their asset management operations, while BoI is planning to buy stake in Bharti AXA MF.