In financial year 2012, while the industry’s assets declined, payouts rose five per cent

Whether or not asset management companies or individual financial advisors have learnt to get accustomed to the new regulatory framework over the past few years, top distributors know well how to mint money, even in tough times.

Commission payments is pouring on large mutual fund distributors. Despite the industry’s continuous struggle to increase penetration of mutual fund products, amid dwindling assets under management (AUM), top distributors managed to pocket 50 per cent more commissions in 2011-12, the year that saw the industry’s average AUM decline 5.1 per cent, or Rs 36,000 crore.

Interestingly, at a time when all stakeholders, from asset management companies (AMCs) to the Prime Minister’s Office, are worried on how to revive the Indian fund market and discussions are on how to ignite interest among distributors through some incentives to sell mutual fund schemes, consolidated data on commission and expenses paid to distributors show a rise of five per cent during the year. Overall, commission payouts stood at Rs 1,860 crore in FY12 against Rs 1,770 crore in FY11.

Foreign bank HSBC continued to remain the top earner as its commissions stood at Rs 154 crore against Rs 119 crore, up 29 per cent, according to the statistics available with the Association of Mutual Funds in India. It was followed by HDFC Bank, which pocketed Rs 130 crore as commissions, 12.5 per cent more than its earnings in the previous financial year.

Among the other top distributors, Citibank NA and ICICI Bank registered a whopping rise of 47 per cent and 54 per cent, respectively, in their commissions by selling mutual fund products. At a time when equity new fund offers, which used to have high upfront load, have almost dried, rise in inflows in the debt category of funds helped distributors see higher revenues, say experts.

Dhruva Chatterji, senior research analyst at Morningstar India, says, “In 2011-12, bulk of the funds mobilisation was in the debt category, comprising fixed maturity plans (FMPs) and short-term bond schemes. Though commissions in such products are lower compared with equity schemes, larger volume helped distributors."

In general, commissions earned on FMPs is in the range of 25-35 basis points (a basis point is one hundredth of a percentage point). Further, investors’ attraction towards monthly income plans, which have a decent upfront fee of 0.75 to 1.25 per cent, also proved beneficial for distributors.

Besides, reasonable money came from capital protection oriented schemes, which also enjoy decent upfront commissions, adds Chatterji. Fund managers say their priority, in such volatile markets, was to protect investors’ wealth.

There are 44 fund houses operating in the domestic mutual fund space, managing assets worth Rs 6.92 lakh crore as on June 30. More than half of the assets are controlled by the sector’s top five players — HDFC Mutual Fund, Reliance Mutual Fund, ICICI Prudential, Birla Sun Life and UTI AMC.