Non-metros help SBI MF mobilise record sum in Balanced Fund NFO

Over two-third was collected from beyond the top 8 cities; jump in average ticket size plays its part

The ongoing bull run in domestic equities has helped mutual fund (MF) houses mobilise record sums through new fund offering (NFOs).

In July, ICICI Prudential Flexicap had collected Rs 9,808 crore—the highest ever by an actively-managed equity scheme. A month later, the record was broken by SBI Balanced Advantage Fund, which collected Rs 14,551 crore.

How did the country’s largest fund house manage to better the record for highest-ever NFO collection by an actively-managed scheme by almost 50 per cent?

Contribution from smaller towns, increase in average ticket size and a push by distributors could have played a part.

The SBI Balanced Advantage Fund NFO saw 400,000 investor applications. Typically, mid-size fund houses get around 15,000-20,000 applications while bigger fund houses get about 50,000 applications during NFOs, said industry players.

D P Singh, chief business officer at SBI MF says the highest-ever collection in its NFOs was supported by strong response from semi urban and rural areas.

The huge branch network of parent State Bank of India (SBI) provided SBI MF the necessary muscle to reach out to a wider audience. The fund house also received encouraging participation from other channel partners such as distributors and online portals.

Experts say the communication made by the fund house struck a chord with investors. The scheme presentation, fund managers' interviews and other communication material of the schemes were distributed to the investors in more than nine languages in order to appeal to pan India investors.

Typically, fund houses tend to focus on only the top eight cities, as they contribute between 60 per cent and 70 per cent of NFO collection. In SBI Balanced Advantage Fund, only 35 per cent came from the top cites and remaining from beyond eight cities.

On the whole, the MF industry has deep penetration in urban centres like Mumbai, Delhi, Bengaluru, Pune, Kolkata and Ahmedabad. The share of beyond 30 cities (B-30) is still low. Out of a total AUM of Rs 35.3 trillion on July, only Rs 6.1 trillion belonged to B-30 cities.

The share of the B-30 cities in the total industry AUM has hovered around just 15-17 per cent over the last four years. The industry has taken efforts to improve the mix

The average ticket size for SBI Balanced Advantage Fund NFO was around Rs 300,000 as against average of Rs 50,000 for an NFO. This was because over 90 per cent of investments came from lumpsum investors. While applications from low-ticket systematic investment plans (SIPs) were less than 8 per cent.

Industry players the success of the scheme will be critical for the industry.

“Over the last few months, the SBI MF NFO as well as some other NFOs have managed to mobilise large sums. Many participants are first time investors. How these schemes do over the near-term as well as the medium-to-long term will determine their future behaviour. It is important that these schemes do well from just from the fund house’s point of view but for the entire industry,” said a senior official of a fund house.

SBI Balanced Advantage Fund is an open-ended dynamic asset allocation fund. The scheme’s objective is to generate long-term capital appreciation by aiming to capture the potential upside and limit the downside in volatile equity markets.