At a time when demands from the Indian fund houses are only increasing for incentives and higher expense ratio, their dependence on top five cities is not declining.
During the first quarter of the current financial year 2012-13 top metros have contributed 2.5 per cent more in industry's consolidated assets under management (AUM) at 73.66 per cent against 71.12 per cent during the January-March quarter.
The rise has come after a continuous three quarters of declining trend whereby smaller cities' contribution had been on the rise. It was an encouraging signal for the industry as a whole, but it could not last for long.
For instance, Mumbai alone contributed a massive 44.48 per cent of AUM against 42.13 per cent as per the statistics available from the industry body Association of Mutual Funds in India (Amfi).The national capital city Delhi, the second largest contributor, added additional gains of 53 basis points to 13.76 per cent in industry's assets.
On the contrary, the other top contributors - Bangalore, Kolkata and Chennai witnessed a decline in their contribution on a quarter-on-quarter basis.
| AUM BY GEOGRAPHY Table : Showing percentage of asset under management from top five cities | ||
| Cities | March | June |
| Mumbai | 42.13 | 44.48 |
| Delhi | 13.23 | 13.76 |
| Bangalore | 5.54 | 5.43 |
| Kolkata | 5.42 | 5.33 |
| Chennai | 4.80 | 4.66 |
| Total | 71.12 | 73.66 |
| Source : Association of Mutual Funds in India (Amfi) | ||
Low penetration of mutual fund products, especially in the country's hinterland, has always been ailing the industry. And rightly so as barring few top fund houses, no other asset management company has a widespread reach across the country.
"We cannot let go the institutional money. And that comes from top cities, mainly from Mumbai and Delhi. And that is which swells the proportion of assets from these cities. There is nothing wrong in managing institutional money but I admit that flows from Tier-I & II cities continue to remain poor," says chief executive officer of a mid-sized fund house who did not wish to be named.
At a time when industry has been demanding for more incentives to better their reach, decline in proportion of assets coming from smaller cities is a cause of concern.
The average asset under management of the June quarter stood at Rs 6.93 lakh crore, up 4.3 per cent, compared with Rs 6.64 lakh crore as in the March quarter.