Mutual funds. Small fund houses gain market share, thanks to digitalisation

Leading fund houses such as ICICI MF, Nippon India, and UTI MF are slowly losing their market share with smaller fund houses gaining strength and entry of new players.

In last four years, mid-sized mutual funds such as Mirae, Edelweiss, Axis and Kotak have scaled up the ladder in terms of market share with sharp increase in average AUM.

According to experts, small mutual funds are taking advantage of growing digital spread, as they are now able to communicate about their products more effectively.

The gainers

For instance, Mirae ranking has increased to 11 from 24 with its average assets under management (AUM) increasing multi-fold in the quarter ended last month to ₹77,674 crore against ₹9,201 crore in June quarter, 2017. Its market share was up 0.47 per cent to 2.34 per cent. Similarly, that of Edelweiss MF was up at ₹54,406 crore (₹7,272 crore) and its ranking jumped to 15 from 26. Its market share jumped to 1.64 per cent from 0.37 per cent.

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In contrary, ICICI MF slipped two ranks to third spot even as its AUM jumped 60 per cent to ₹4.16 lakh crore (₹2.60 lakh crore) while Nippon India MF rank was down three spots to 6 from three with average AUM increased to ₹2.40 lakh crore (₹2.23 lakh crore).

Market share of both ICICI MF and Nippon India MF were down to 12.56 per cent and 7.25 per cent from 13.33 per cent and 11.42 per cent, respectively. Interestingly, SBI MF retained its numero uno position in terms of market share.

Growth in folios

Over the past five years, an ICICI AMC spokesperson said, the fund house has seen growth in terms of folio count and assets. In the said time frame, folio count has grown 129 per cent to 1.14 crore and AUM was up 70 per cent.

Four new players with substantial financial services background have entered the mutual fund business with Japanese company Nippon Life taking over erstwhile Reliance Mutual Fund.

Arun Kumar, Head of Research, FundsIndia said smaller AMCs are now able to compete on the basis of consistent performance, differentiated products and transparent communication.

Large mutual funds in the past had the advantage of a strong distribution network with a physical presence and fleet on the ground to build relationships with distributors. As technology evolved and everything now done digitally, distribution is no more the key differentiator, he said.

The penetration levels of mutual fund industry are currently very low as a percentage of GDP at 12 per cent is among the lowest and a fraction of global average of 63 per cent, said Kumar.