Small fund houses are now eyeing smaller cities, following capital market regulator Securities and Exchange Board of India’s (SEBI’s) recent decision to let fund houses charge extra if they go beyond top 15 cities.
At present, most small mutual funds are centred only around the four metros while the bigger ones have a substantial presence in other cities. So, while smaller funds concentrate on high networth individuals and institutional investors for their inflows in metros, they can concentrate on small retail investors with debt products in smaller cities, said experts.
After its board meeting on August 16, the regulator had said that mutual funds could charge extra 30 basis points (100 basis points is 1 percentage point) above the existing fee if they raised at least 30% of their inflows from outside the top 15 cities.
Smaller funds would, however, need different strategies and separate set of products if they venture into smaller cities, said analysts. “Mutual funds would go beyond the top 15 cities but the important differentiator would be the product pool offered in smaller cities,” said Gopinath Natarajan, CEO, India Infoline Mutual Fund.
At present, around 70% of the inflows of top 10 fund houses come from metros and bigger cities. While for the smaller mutual funds, less than one fifth of the total inflows come from cities beyond metros.