With investors rushing into mutual funds (MF) like never before, top mutual fund distributors are laughing their way to the bank. Asset management companies (AMC) paid a whopping Rs 8,533 crore to about 979 top MF distributors by way of commission and expenses in 2017-18. This was the financial year when the MF industry saw its asset under management rise by about one-fourth, AMFI data shows.(the sentence was too long) In FY17, AMCs had paid out Rs 5,000 crore as gross commissions and expenses to about 732 top MF distributors.
Clearly, the good times for the mutual fund industry reflected in the higher incomes for top MF distributors. The number of distributors who earned equal or more than Rs 1 crore stands at over 800 in FY18, compared to 470 in FY17. The 979 mutual fund distributors are responsible for about 44% of total industry assets.
The increase in distribution commissions comes on the back of mutual fund industry's asset jumping from Rs 17.5 lakh crore from FY17 to over Rs 21.3 lakh crore in FY18. As much as Rs 2.71 lakh crore worth net inflows were recorded in FY18, as the number of investor folios jumped from 5.5 crore to 7.1 crore in the same period. Mutual fund commission is a function of two factors: upfront fee and trail fee, with a majority of being a trail. The trail fee in equity, tax-saving and hybrid schemes in equity schemes (except arbitrage) is about 1-1.25% per annum. In debt schemes (excluding liquid), the trail is 0.15-0.75%.
MF distributors use a combination of offline and online methods to serve clients and bring money to fund-houses. Distributors can be broadly grouped into banks, stock brokers, digital-led outfits, corporate entities, wealth managers, and individuals.
In 2017-18, the top MF broker club in terms of commissions, like in other years, is dominated by banks but is again headed by Surat-based NJ Indiainvest Pvt Ltd (Rs 786.77 crore). It is followed by HDFC Bank (Rs 641.39 crore), State Bank of India (Rs 557.90 crore), Axis Bank (Rs 537.71 crore), ICICI Bank (Rs 470.28 crore), ICICI Securities (Rs 316.53 crore), Kotak Mahindra Bank (Rs 274.29 crore), Citibank (Rs 248.96 crore), Prudent Corporate Advisory Services (Rs 217.82 crore) and Standard Chartered Bank (Rs 185.42 crore). Overall, the top-10 MF distributors have earned Rs 4,237.08 crore in FY18, a jump of 78% compared to Rs 2379.42 crore by the top-10 of FY17.
Continuous and robust inflow into equity mutual funds is one reason for the larger commissions in FY18, with equity, balanced and tax-saving schemes witnessing year on year doubling of net inflows. An important factor is systematic investment plans or SIPs regularly bring Rs 6000-7000 crore for the industry every month.
The top 10 individual MF distributors all earned about Rs 5 crore or more in FY18. Dhruv Lalit Mehta led the chart with Rs 8.74 crore, followed by Gaurav Ganpule (Rs 8.43 crore), Ganesh Shridhar Shanbhag (Rs 7.43 crore), Padam Singh Raj Purohit (Rs 6.82 crore), Roopa Venkatkrishnan (Rs 6.62 crore), Shivam Mehrotra (Rs 5.96 crore), Hari Ghanashyam Kamat (Rs 5.94 crore), Mukesh R Parikh (Rs 5.61 crore), Navneet Kumar (Rs 5.08 crore), and Sadashiv Arvind Phene (Rs 4.95 crore).
The Securities and Exchange Board of India (Sebi) way back in in 2011 had directed individual asset management companies (AMCs) to disclose the total commission and expenses paid each year to their large distributors. A majority of the distributors saw a healthy rise in commission and expense payments from mutual funds. Banks made hay as distributors, with many of them also having mutual fund companies or asset management companies of their own.
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