MF platforms fail to shine

The mutual fund platforms of the BSE and NSE have been seeing declining transactions, particularly in the last few months. From a few hundred a day, the transaction numbers have been slowly slipping to less than 100 a day.

The BSE Star MF platform sees more transactions than the NSE MFSS.

BSE's platform has around 70 per cent of the market share and 90 per cent of the industry AUM, said Mr V. Balasubramaniam, who heads the platform at BSE.

The BSE Star MF platform has 27 Asset Management Companies.

Despite its leadership position, the platform has not been able to draw in investors or distributors.

December 2009 saw an average of 41 transactions. Calendar year 2010 saw an average of 160 transactions a day.

Between October 2010 and February 2011, BSE Star MF saw several transactions, but the numbers soon started tapering off.

Prior to October 2010, the average number of orders was in the double digits, with the exception of July 2010 which saw an average of 743 deals.

The BSE platform is primarily for order collection, say BSE Star MF officials.

The units of open-ended mutual fund schemes are listed. After the order for the purchase of the unit is made, it is sent to the Registrar and Transfer Agents, who processes it and credits the units to the exchange's clearing corporation from where it is sent to the brokers' pool account.

This process takes only about a day, said the officials.

But the platform has not been able to take off because of the lack of exit options. “The intent of listing was to give the investor the option of exiting. But where are the buyers? The platform doesn't work at all as there is a mismatch between the sell and buy orders,” said an official who did not want to be quoted.

Distributors too have not shown much interest in the platform. Of the 180 members who are registered with the BSE, only 30 to 40 are transacting on a regular basis, said a BSE official. These brokers are paid commission on the basis of the number of repeated investments.

This is against the basic principle of a mutual fund, which is a long-term investment product.

This reduces the trail fees earned by distributors.

“The fees earned by a distributor selling stocks at the exchange is much higher than that what he gets for selling mutual funds for churning portfolios,” said an official with a mutual fund.

Most analysts and distributors are of the opinion that transactions on these platforms will not pick up.

“Structurally, this is a good model. I think we will need time to figure out the finer details of what it has to offer,” said Mr Rajesh Krishnamoorthy, Managing Director, iFast Financial & fundsupermart.com.

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