The share of the top five states in the total assets under management (AUM) of the mutual fund industry has decreased slightly in the last few years though they collectively still account for a significant chunk of the total assets of the fund industry.
The five, Maharashtra, New Delhi, Karnataka, Gujarat and West Bengal, together accounted for 70% of the total AUM with Maharashtra alone accounting for 41% of the assets, according to a latest study by Crisil.
Maharashtra was followed by New Delhi with a 10% share with Karnataka and Gujarat both pegged at 7% each. West Bengal had a share of 5%. Between March 2014 and March 2018, the share of these top five States has fallen 200 basis points (bps) from 72% to 70%. The study also found that while Gujarat had the highest allocation (42%) towards equity funds, most investors (39.5%) in West Bengal preferred debt funds. Maharashtra saw 32% of assets allocated to equity and debt, each.
This assumes significance as the Securities and Exchange Board of India (SEBI) has for long been pushing fund houses to move beyond the top 15 cities – known as B-15 in industry parlance – to get more investors enter the capital market through the relatively safer mutual fund route. The share of other cities has registered an increase over the years. Speaking at a recent conference organised by the Association of Mutual Funds in India, SEBI Chairman Ajay Tyagi said that share of the cities beyond the top 15 in overall AUM rose from 12.7% in 2012-13 to 17.7% in 2017-18.
Higher expense ratio
The capital market regulator has allowed fund houses to charge a higher expense ratio for getting investors from far-flung geographical areas. Total expense ratio, which broadly ranges between 0.75% to 2.5%, is the fee that fund houses charge investors to manage all the expenses of the fund house.
“I hope the dispensation to allow AMCs to charge additional TER (up to 30 bps) of new inflows from beyond top 30 cities would facilitate in further deepening the industry,” Mr. Tyagi had said while highlighting the fact that the AUM has grown over two times in the last 5 years to touch ₹23 trillion in June.