Indian MFs outperform foreign peers in asset growth

Foreign players have been losing market share since 2012

Indian mutual fund houses outpaced foreign peers in asset growth for a third year in a row in 2014-15. A better brand connect with investors, relatively high proportion of equity assets and recent exits of several foreign names have helped domestic players maintain their dominance in the Rs 12-lakh crore mutual fund industry.

In 2014-15, the overall sector's average of assets under management (AUM) grew 31.3 per cent, lifting the asset base from Rs 9.05 lakh crore to Rs 11.88 lakh crore. Domestic fund houses, put together, put up a better show as their assets rose 31.5 per cent, while foreign peers’ collective assets were up 29.4 per cent.

In FY14, domestic players grew 11.7 per cent while foreign AMCs could register a growth of 3.73 per cent and in FY13, the AUM growth rates were 23.5 per cent and 17.5 per cent, respectively.

Further, foreign fund houses are continuously losing market share since 2012. During these years, they have lost nearly 1.3 per cent to local players. Currently, they control 10.4 per cent share of the sector's total AUM against 11.8 per cent in 2012. Exits of fund houses Morgan Stanley, Fidelity, ING, Daiwa and PineBridge in recent years have contributed.

“Ultimately, it is the consistent performance of schemes of fund houses that matter the most. Foreign players like Mirae Asset and Franklin have done quite well and managed to garner assets. But it is equally true that investors and distributors, in particular, tend to avoid fund houses whose existence, in itself, could be under question," said a senior official with a domestic fund house.

Table showing % growth in average AUM of Indian MFs and their foreign peers
Year	Local MFs	Foreign MFs	Industry
2014-15	31.55	29.42	31.32
2013-14	11.73	3.73	10.83
2012-13	23.55	17.55	22.84
2011-12	-6.4	5.94	-5.11
Compiled from data from Association of Mutual Funds in India

Franklin Templeton and Mirae Asset are exceptions. Franklin, despite being a foreign player, has established its presence in India with a consistent fund performance and better connect with its investors. With Rs 70,000-crore AUM, the fund house has long been among the top eight in the country.

Mirae has nearly 90 per cent of its assets in equity and plans to increase its AUM by five times in the next three years. Its  schemes have done well in recent years. Its chief executive officer, Jisaang Yoo, recently told Business Standard, “About 12 per cent of our business is from B15 cities. In three years, we want AUM of Rs 7,000 crore."

Higher concentration of institutional money in foreign players is also to be blamed. Generally, such assets are in liquid funds. "Looking at the steep returns India's stock indices have provided in the past year, any fund house with a little equity component will, obviously, not be able to see the appreciation in assets witnessed in fund houses with higher equity components in the overall assets," he added.

Assets under the equity segment were Rs 3.45 lakh crore as of March 31, against Rs 1.91 lakh crore at the end of March 2014, a rise of nearly 81 per cent.

Though fresh assets of about Rs 71,000 crore were added during the last financial year, the rest of the appreciation was on the back of a rise in the stock market.