Retail equity fund investors have mostly redeemed their investments at a profit, finds a joint study by Boston Consulting Group (BCG) and Computer Age Management System (CAMS). CAMS is the registrar and transfer agent for the mutual fund industry with a 60% market share. It finds that 87% of retail investors with investments less than Rs 1 lakh have redeemed equity funds at a profit.
In contrast, it has been the NFOs that has caught the investors on the wrong foot. While 49% of NFO investments have been redeemed at loss, 22% have been redeemed at a ‘minor’ profit. Retail customers continue to dominate the equity mutual fund industry with over 90% of investment volumes. ?Systematic Investment Plans (SIP) and equity linked saving schemes (ELSS) have grown over the past few years to become substantial part of the equity asset under management (AUM)? said Alpesh Shah, Partner & Director at BCG. It has gone up from 5% of inflows in 2007 to 19% in the first quarter of 2010. This is expected to act as a cushioning for the fund industry ? given that SIPs continue to flow in even in bad market times. There are currently 40 lakh active SIPs as on date with an small ticket size of Rs 2,300 mentioned the report.
Major regulatory changes brought into the fund industry ? be it entry load ban or that of elimination of the no objection certificate (NOC) to change distributor, have had an impact, finds the report. For instance, average commission has come down to over 90 basis points in 2010 compared to over 180 basis points. In the no load regime, nearly 1% of upfront commission is being paid by the AMCs out of their revenues.
?Regulatory changes like ban on entry load have hurt most the small IFAs while some of the large distributors have grown in the last three years,? said Shah.
The removal of the NOC requirement in Dec ’09 has led to an increase of six times in the number of transfer requests and an increase in transfer AUM of nearly 2.5 times.
A city-wise study of fund assets revealed that while Mumbai and Delhi constituting a lion share of 46%, locations beyond the top ten cities are gaining market share over the years. ?The share of AUM beyond the top ten cities has increased from about 10 % in March 2003 to about 26 % in March 2010?. It added that the share of equity net inflows is likely to be much larger. It estimated it to be around 30% for the equity mutual fund industry.