Which are the most popular direct plan mutual funds?

Last Updated on December 29, 2021 at 12:02 pm

Ever wondered which are the most popular direct plan mutual funds? This is a list of the largest (AUM wise) equity and debt direct plan funds. The data is sourced from AMFI and is as on Sep 2018. The post is inspired by a series of questions by Anath at Facebook group, Asan Ideas for Wealth and several other unsubstantiated opinions about fund popularity.

For the uninitiated, direct plan refers to funds which do not pay commissions from your investment value every day to distributors. The opposite of a direct plan is the regular plan. In this case, a commission is removed from your investment value every day along with expenses for the scheme before the NAV is declared. See this to understand how it makes a difference: Illustration: Direct Mutual Funds vs. Regular Mutual Funds

Is it right to assume that a fund with higher AUM is popular? In the case of direct plans, I think so. Many funds often have a social buzz. That is many people talk about it in a good or bad way. That does not mean they or anyone else have enough money in it. AUM is a quantifiable source of popularity. In the case of regular plans, popularity only means the bank or the distributors are “motivated enough” to push it more.

One can argue that the direct fund investment portal that offers fund suggestions may influence the choices of direct plan investors. This may well be the case in future, but as of now, I am sure you will agree that this is not the case.

Another important point that direct plan investors should keep in mind is the fact that the AUM you see in portals like Value Research is the sum of the regular plan and direct plan AUM. This can pretty misleading in some cases.

Take the case of ICICI Nifty Next 50 Index fund. This has a total AUM of  271.96 Crores. One might assume that much of this fund’s AUM comes from the direct plan.  This is indeed correct. The direct plan AUM (growth + dividend option) accounts for 63.8% of the total aum, and this is impressive. How much of this is due direct plan portals is unknown.

On the other hand, take UTI Nifty Next 50 Index fund which is only a few months old and already has 235 crores. Only 24.7% of this comes from the direct plan. The AMC had possibly asked distributors to push the fund, especially in the NFO period. God bless the investor who wishes to invest in the regular plan of an index fund!

Another interesting case is ICICI Equity Arbitrage. The direct plans (growth + dividend + bonus*) make up for 57% of the total AUM. The dividend option of the direct plan constitutes 47% of the total AUM!  The regular plan dividend option only constitutes 32% of the AUM! One can only guess that the direct plan dividend investors are high net worth individuals (HNIs) who do not mind paying the 10% tax on equity dividends. * I do not know why there is a bonus option listed only for the direct plan!

The point is that investors who wish to gauge popularity should look at the regular plan to direct plan break up in AUM. Members of FB group Asan Ideas for Wealth are especially guilty of assuming things based on a couple of threads. Many assume PPFAS and QLTE are popular among direct plan investors and this cannot be more wrong.

On Sunday I asked members of said group to guess (without any research) which direct plan equity fund had the highest AUM. Many responses were close, and six people gave the right answer. As mentioned, the first two guesses will receive a small prize (along with the admin for allowing it 🙂 ) Sudipta Badapanda and Amit Makhija.

Looking at the list of direct plan equity funds, one thing should be clear. Much of the AUM has come from regular plan investors who have switched to direct over the last five years and continued to invest in it. If the direct fund portals take off in a big way, this dynamic could change, and we might see more cases like ICICI Nifty Next 50 Fund. However, for this to happen, the regular AUM slice, on the whole, should decrease. I think it will in 5-10 years depending on how the markets behave.

List of most popular direct plan equity funds

This list (and the one below) is sourced from AMFI and is provided on a “fair use” basis with attribution for educational and research purposes in public interest.

Please note that I have ranked funds in descending order of AUM without adding the growth option and dividend option AUM.  IMO it will not alter the rankings by too much for equity funds (the arbitrage fund rankings might change a bit). In any case, the first five spots will remain unchanged. So in what you see, unless specified otherwise, the scheme refers to growth option.

HNIs and perhaps institutions are responsible for a good chunk of the AUM in direct plans of arbitrage funds. There are 38 funds having an direct AUM more than 1000 Crore.

List of most popular direct plan debt funds

In this case, the list is dominated by liquid funds due to institutional funds. There are many credit risk funds too perhaps because of HNI money? Retail participation in direct plan debt fund is not as high as in the case of equity (source AMFI reports).

The most popular direct plan debt fund has 5.8 times the AUM of its equity counterpart! There are 93 funds with direct AUM of more than 1000 crores. In this case, the dividend option may influence the rankings but there are too many dividend options (monthly weekly, quarterly, general) and it is too much work to add them all!

What are your impressions?

What do you make out of this list? Is it as per your expectations or were there surprises? Let me know in the comments section.

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