Buying directly from funds could increase returns
With asset management companies (AMC) increasing the number of branches by more than 400 this year to reach retail households in smaller cities and towns, investors there can look forward to increased returns.
Reason: if households invest directly from a branch office of an AMC, they won’t have to pay entry load, which ranges from zero per cent for debt funds to 2.5 per cent for equity funds.
This follows a December 31, 2007 announcement by capital markets regulator Securities and Exchange Board of India (Sebi) that stated: "With effect from January 04, 2008, investors making applications for investments in mutual fund schemes directly without routing through any distributor, agent or broker ie through internet, submitted to AMC or collection centre/ investor service centre would not be subject to entry load."
Branch expansion into smaller towns and cities like Rohtak, Meerut, Alwar, Vellore and Panipat, according to senior executives of AMCs, will not only help them deliver better investor services, it will also build confidence in mutual funds among investors, mutual fund executives said.
"The investor wants to have confidence that the brand he is investing in is there to service him and to sort out any issues that he may have," said Vikrant Gugnani, chief executive officer, Reliance Capital Asset Management (RCAM), which manages over Rs 1,00,000 crore of assets. "I believe that this will strengthen my customer service platform and would enable me to service my customer anytime anywhere and that is the vision."
While this will edge out distributors, the conventional intermediaries for mutual fund sales, fund houses still insist on their dependence on distributors and want that to be their primary mode of expansion. "Even though we will be physically present, financial intermediation will hold its importance and it will play its role on the advisory and financial planning fronts," said Debashish Mohanty, head of marketing, UTI, India’s oldest mutual fund that currently manages Rs 52,600 crore.
As a by-product of this expansion will come investor education. "Investor education is an important aspect of overall industry development and by expanding our presence we also focus on educating investors at large in that location," said Vikram Kaushal, head retail sales & distribution, ICICI Prudential AMC, that manages Rs 57,575 crore.