The assets under management (AUM) for the domestic mutual fund (MF) industry has jumped six fold in the past decade to Rs 38.2 trillion. However, the number of asset management companies (AMCs) — managing at least some AUM — have declined from 45 to 42.
Experts say while the industry has a lot of growth potential, intense competition and low margins make it challenging for smaller players — unless they carve out a niche for themselves.
The so-called total expense ratio (TER) — the fees charged by AMCs for managing and operating schemes — have declined over the years due to regulatory changes, intense competition and growing popularity of direct plans — weighing on the profitability of AMCs.
The top five AMCs account for close to 45 per cent of the more-profitable equity AUM. Over the next five years, the industry AUM is projected to grow at an annualised rate of 14 per cent. The number of AMCs is also expected to cross 50 in the next few years, with at least half a dozen firms currently waiting for MF license.
Last week, market regulator Sebi has set up a working group to explore the possibility of allowing private equity (PE) firms to start a MF on their own.
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