Indian Mutual fund industry which saw its profitability being hit in the last financial year 2010-11, has halved salary increments and bonus for its employees. According to sources, while increments were moderate in the range of 10-15%, bonuses were slashed by half, constituting about 12-18% of salary in the financial year.

?Marketing professionals have missed their targets in the last year with not much of activity seen in the new fund offer (NFO), while retail investors continued to redeem equity schemes? said a market manager of a leading fund house.

In the financial year 2010-11, the mutual fund industry managed to collect over R3,300 crore through NFOs, which was 44% lower than R5,989 crore collected during 2009-10.

Rajan Krishnan, chief executive of Baroda Pioneer mutual fund says, ?We are yet to finalise it (increments and bonuses), but I think it will be moderate in comparison with the previous year.?

According to the market sources, HDFC mutual fund and Tata mutual fund have already announced moderate increments, while few fund houses such Birla Sun Life, UTI mutual fund and Baroda Pioneer are on still the stage of finalisation.

As per industry data, equity assets on a point-to-point basis have fallen about 2.5% during financial 2010-11, while the overall assets fell even more by 3.5%.

FY11 profit figures aren?t out for many fund houses, except top fund houses such as HDFC, Reliance and Birla Sunlife. However, many fund houses are believed to have faced severe pressure on profitability this year.

?If we look at 2008-09, there were no salary hikes with our economy going through a bad phase. Thus in 2009-10, when markets surged, we gave decent hikes. But in 2010-11, market performance was below expectations with net sales turning negative. Also margins were under pressure as fund houses had to pay distributor?s commissions,? said the chief executive officer of a leading fund house.

Before the ban on entry load, fund houses paid commission of 2.25% of investment amount to their distributors from the entry loads. But ever since the entry loads have been banned, some fund houses are paying 0.75-1% upfront from their own pockets. The market regulator, Securities and Exchange Board of India (Sebi) had banned entry loads in August 2009.

According to market participants, partial existence of entry loads during financial year 2009-10 coupled with steady rise in equity market helped provide high increments as well as bonuses. However in 2010-11 there wasn?t much excitement as one did not see major inflows into the equity schemes.