3.79 lakh crore and ICICI Prudential MF at number 3 with Rs 3.68 lakh crore
With assets under management (AUM) at Rs 3.82 lakh crore, SBI Mutual Fund has emerged as the largest fund house in the country, forcing HDFC MF to the second spot, data compiled for January 2020 shows. In hindsight, it is natural that India’s biggest bank will have the biggest mutual fund. The 1, 2 and 3 spots in the mutual fund industry now belong to the sister concerns of big banks: SBI, HDFC, and ICICI.
For many months now, SBI MF was snapping at the heels of the two dominant players viz. HDFC AMC and ICICI Prudential AMC. Thanks to copious and sustained inflows from EPFO and a titanium-strong banking distribution network, SBI MF is clearly racing ahead in the AUM race. Aditya Birla Sun Life MF and Nippon India MF (formerly Reliance Nippon) are the lone two non-bank players in the top-5 slot. Read on to know more.
SBI Mutual Fund has jumped from 3rd to 1st slot in January 2020 compared to the standings in December 2019, propelling it to Rs 3.82 lakh crore. HDFC MF is at 2nd spot with Rs 3.79 lakh crore and ICICI Prudential MF at number 3 with Rs 3.68 lakh crore. Like the rest of the industry, a reversal of inflow into debt schemes and help from equity assets pushed up assets.
In terms of equity assets, SBI MF is the largest with Rs 1.94 lakh crore compared to HDFC MF’s Rs 1.54 lakh crore. SBI MF is a major beneficiary of a steady stream of equity inflows through the government-run EPFO. Though SBI MF and UTI MF both get EPFO money in index products, SBI’s growth boost can be gauged from the fact that SBI ETF Nifty 50 has Rs 66,217 crore while UTI Nifty ETF has Rs 16,839 crore. Similarly, SBI ETF Sensex has Rs 23,960 crore while UTI Sensex ETF has 6,527 crore. Do note that SBI ETF Nifty 50 is the biggest equity fund in the MF industry today.
In debt, SBI MF with Rs 1.63 lakh crore is second to HDFC MF’s Rs 1.99 lakh crore. HDFC MF has the biggest debt fund in form of the HDFC Liquid Fund with Rs 76,288 crore, followed by SBI Liquid Fund with Rs 53,524 crore, and ICICI Prudential Liquid Fund with Rs 52,742 crore.
In hybrid funds, HDFC Balanced Advantage Fund is the top with Rs 44,151 crore, followed by SBI Equity Hybrid Fund with Rs 32,585 crore, and ICICI Prudential Balanced Advantage Fund with Rs 28,853 crore.
Interestingly under the average assets under management (AAUM) metric, HDFC MF is still at the top with Rs 3.88 lakh crore, followed by SBI MF at Rs 3.83 lakh crore and ICICI MF at Rs 3.75 lakh crore. These figures include funds of funds.
The bank network of all top three players is strong, but SBI has an edge. SBI is the country’s largest commercial bank in terms of branches and employees.
Such a wide reach gives SBI an advantage in terms of cross-selling SBI MF products. Plus, it appears that SBI bank does not sell much MF products other than those of sister concern SBI MF.
For instance, SBI MF (SBI Funds Management) paid Rs 478 crore in commissions & expenses in 2018-19 to distributor SBI. SBI received Rs 487 crore from all MFs as commissions & expenses in 2018-19, which means 98% of its money came from SBI MF alone. This means if a customer comes to an SBI branch, bank employees virtually ensure that they are sold SBI MF products.
In comparison, the open architecture system seems to be working better at other banks. ICICI Prudential MF (ICICI Prudential Asset Management Company) paid ICICI Bank Rs 233 crore as distributor commissions & expenses in 2018-19. So, ICICI Prudential MF accounted for 66% of the Rs 355 crore money that ICICI Bank got as an MF distributor. HDFC Bank, as MF distributor, got Rs 496 crore as commissions and expenses from the entire industry in 2018-19, and only 34% or Rs 167 crore of its comes from HDFC MF ( HDFC Asset Management Company).
The almost exclusive focus of SBI in getting fund distribution income from selling SBI MF schemes is clearly a masterstroke. It benefits both SBI and SBI MF and prevents the average customer from going outside that ecosystem.
From an investor standpoint, your MF house’s asset size does not matter beyond a point. There is no qualitative difference between a fund-house with Rs 3.8 lakh crore, a fund-house with Rs 3.6 lakh crore or a fund-house with Rs 2 lakh crore. These numbers make more sense for CEOs and management leadership.
If you are an investor in a fund-house’s equity shares, then profit and profit growth matter more than just assets. Typically, the profit in managing Rs 1 crore equity assets is close to what managing Rs 7 crore liquid debt assets are for large fund-houses. So, the more equity assets a fund-house has, the better it is for shareholders.
Of course, a sharp drop in assets for a fund or a fund-house overall is alarming. In the case of SBI, HDFC or ICICI Prudential, the pace of asset growth is the differentiating factor. If a fund performs badly and this for a sustained period, fund assets drop.
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