Interested to know which mutual funds retail investors prefer, how high Networth Individuals invest? Let us take a look at the Association of Mutual Funds in India – AMFIs AUM-Category / Age-Wise and Folio Data as on June 30th 2019. I had recently used this to find out how popular index investing is in India (see video below).
The AMFI uses four investor classifications: Corporates; Banks/FIs; FIIs; High Networth Individuals (HNIs); Retail; HNIs are those who can invest Rs. 2 lakh or more (I assume in one shot in any scheme, not just NFO). FI is an Indian Financial Institution, FIIs are Foreign Institutional Investors. This is the vision document of the industry to increase its foothold
The MF industry manages 24,25,040.35 Crores as on June 30th 2019 spread (unevenly) across 83,771,689 folios. Let us look at which categories are popular among each investor type as a percentage of this total AUM.
Let us begin with the share for each investor type. The main source of revenue for AMCs is from corporates and HNIs. Retails is significant but only third. MF penetration among Banks and FIs is surprisingly low!
Investor Classification
Total AUM
Corporates
39.79%
Banks/FIs
1.93%
FIIs
0.36%
High Networth Individuals*
34.03%
Retail
23.89%
Corporates
Corporates prefer to park most of their money in liquid or overnight funds with almost an equal amount in other debt funds. Surprised to find 2% of the total AUM in hybrid funds!
Category
Corporates
Liquid Fund/Money Market Fund/ Floater Fund
14.96%
Remaining Income/ Debt Oriented Schemes
14.05%
ETFs(other than Gold)
5.41%
Growth/ Equity Oriented Schemes
2.95%
Hybrid Schemes
2.00%
Gilt Fund/ Gilt Fund with 10-year constant duration
0.21%
Index Funds
0.10%
Gold ETF
0.09%
Fund of Funds investing Overseas
0.02%
Solution-Oriented Schemes
0.00%
High Networth Individuals
The HNIs prefer longer duration debt funds, equity funds and hybrid funds! The shorter duration debt fund share is surprisingly low suggesting that they prefer other means for liquidity. Impressed that HNIs like Hyrbid funds.
Scheme Category
High Networth Individuals
Remaining Income/ Debt Oriented Schemes
10.90%
Growth/ Equity Oriented Schemes
10.78%
Hybrid Schemes
8.16%
Liquid Fund/Money Market Fund/ Floater Fund
3.56%
ETFs(other than Gold)
0.17%
Solution-Oriented Schemes
0.16%
Gilt Fund/ Gilt Fund with 10-year constant duration
0.11%
Index Funds
0.07%
Gold ETF
0.07%
Fund of Funds investing Overseas
0.05%
Mutual Fund Categories Preferences for Retail Investors
Scheme Category
Retail
Growth/ Equity Oriented Schemes
17.44%
Hybrid Schemes
3.74%
Remaining Income/ Debt Oriented Schemes
1.51%
Solution-Oriented Schemes
0.53%
Liquid Fund/Money Market Fund/ Floater Fund
0.44%
ETFs(other than Gold)
0.07%
Index Funds
0.07%
Gold ETF
0.05%
Gilt Fund/ Gilt Fund with 10-year constant duration
0.03%
Fund of Funds investing Overseas
0.02%
Observations
In the case of retail investors, there is a significant skew towards diversified equity funds. It is a shame that the hybrid share is quite poor. Even today the direct share of the retail AUM is only about 12% or so. So the choices here are primarily driven by sales guys with a projection of huge returns in the future (without this no one would buy!!)
The HNI direct share is twice that of retail. This could be a reason why HNIs prefer hybrid scheme a lot more. Also, the sale guys may be offering “lower” version so that the higher AUM is stickier.
How popular is index investing in India?
The full data reported category-wise is presented below.
Liquid Fund/Money Market Fund/ Floater Fund
Investor Classification
AUM (Rs. Cr)
% to Total
Corporates
362782.6
73.7
Banks/FIs
32269.5
6.56
FIIs
108.02
0.02
High Networth Individuals
86327.06
17.54
Retail
10773.05
2.19
Total
492260.2
100
Investor Classification
No of Folios
% to Total
Corporates
53111
2.64
Banks/FIs
1745
0.09
FIIs
659
0.03
High Networth Individuals*
376419
18.75
Retail
1576063
78.49
Total
2007997
100
Gilt Fund/ Gilt Fund with 10-year constant duration
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