Mutual fund distributors pocketed higher commission in FY13 compared with the year-ago period, benefiting from a substantial rise in debt assets, especially long-duration bond funds.
The commission paid to top 20 MF distributors in FY13 rose 23% to R1,448 crore from R1,176 crore in FY12, data released by industry body Amfi show. The top 20 distributors mopped up about 62% of the total commission paid in FY13.
Citibank overtook HSBC to become the top commission earner in FY13 and pocketed R165 crore. HDFC Bank was the second-highest earner (R161 crore), followed by HSBC (R144 crore), which was the top commission earner in both FY11 and FY12. National distributor NJ IndiaInvest (R124 crore) and Standard Chartered Bank (R88 crore) were the others among the top 5. In percentage terms, IIFL Wealth Management?s commission rose 204%, the most among the top 20 distributors. Interestingly, as many as 10 banks featured among the top 20 MF distributors that earned the most commission.
The total commission paid to the top 332 distributors in FY13 rose 27% to R2,367 crore against R1,860 crore in the year-ago period. The rise in debt assets, especially long-duration bond funds, helped prop up commissions, said experts. Investors flocked to long-duration funds in FY13 as the RBI reduced key policy rates by 100 basis points over the year. Total assets of Morningstar Intermediate Bond category comprising mid-to-long-term debt/income funds grew around 580% in FY13. Commissions on longer-duration bond funds typically range between 1% and 1.5% compared with 1.25-2% for equity schemes.
Debt assets of the MF industry rose about 32% in FY13 to R5 lakh crore at the end of March 2013 from about R3.8 lakh crore at the end of March 2012. In the same period, equity assets fell about 5% to R1.72 lakh crore from R1.82 lakh crore even though benchmark equity indices rose 8%.
Industry observers caution that the increasing acceptance of direct plans among distributors might eat into distributor commissions going forward. ?The share of direct plans is likely to rise substantially, especially on the fixed income side, and this may impact commissions,? said Dhirendra Kumar, CEO, Value Research.
Direct plans, which became operational in January this year and allow investors to bypass distributors and save on commission, contributed about 15% to the industry AUM for the three months ended March 2013. The share has already risen to 25% of the total industry AUM for the three months to June 2013. Kumar, however, said assets from B15 (below top 15) cities could help boost distributor commissions in the coming years. ?Fund houses are yet to penetrate into the B15 cities. When that happens, contributions from commissions in these cities could be significant,? he noted.