Top 5 fund houses increase their share in folio accounts

The top five mutual fund houses in the country saw their folio share increase by 6 per cent from 52 to 58 per cent in FY '11 despite the industry witnessing a decline in the number of folio accounts.

Only HDFC and ICICI Prudential saw an increase in folios.

However, despite a drop in folio accounts, fund houses such as UTI, Reliance MF and Birla Sunlife saw their share increase in the MF industry. UTI, with its strong retail presence, saw its folio share increase from 19.7 to 21 per cent. Reliance holds the second largest share at 15.8 per cent. It was 14.7 per cent at the end of FY '10. HDFC saw its share go from 7.7 to 9.9 per cent, ICICI Prudential from 5.4 to 5.9 per cent and Birla Sun Life from 4.8 to 5.1 per cent.

Consolidation is the way forward for the mutual fund industry as is obvious from the fact that the top five fund houses now account for a larger share of the folio numbers, say fund experts.

“Products are today sold on the basis of merit. For an investor the brand name and trust are more important than earlier. However, having said that, some smaller fund houses despite good performance lose out on investors because of lack of adequate advertising,” said Mr Rakesh Goyal, Senior Vice-President, Bonanza Portfolio.

Of the top five, only two fund houses saw an increase in their folio numbers. HDFC saw a 20 per cent increase, while ICICI Prudential saw an increase of 2.5 per cent. Fund analysts attribute this to the robust in-house distribution system of these fund houses, which is in the form of their own banks.

“Several individual distributors and other multi-national banks that were into mutual fund distribution have closed shops due to lowered investor response. This has impacted the sales of the smaller fund houses which do not have a strong distribution network,” said the head of a distribution firm.

The mutual fund industry lost close to 36 lakh folios in FY ‘11. The number of folios in the industry stood at 4.69 crore at the end of FY '11 as against 5.05 crore in FY10.

Folio numbers were not expected to rise anytime soon, say fund analysts, unless distributors are compensated well. “Margins are low and salary costs of distributors are high and continue to increase every year due to inflation. Most distributors are, therefore, shifting to other products,” said a mutual fund official.

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