BackMF commissions of top distributors rise
Though more closed-end schemes are being launched, change in taxation will affect some categories
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Income earned by top distributors by selling mutual fund (MF) schemes continues to grow. According to figures disclosed by the Association of Mutual Funds of India (Amfi) and compiled by Value Research (an MF tracking firm), share of the top 10 distributors in the overall commission earned by 329 distributors (whose commission income was disclosed) has gone up from 45% in 2012-13 to 47% in 2013-14. Share of the top 20 distributors has gone up to 64%, up from 62% a year ago.
Amfi discloses commissions of distributors that meet any of the four criteria—they have to be present in at least 20 locations, or manage assets worth at least 100 crore, or should have received commissions worth a minimum of 1 crore across all MFs put together, or received above 50 lakh from a one fund house. As per Securities and Exchange Board of India guidelines, it is mandatory for fund houses to disclose commissions paid to distributors. Amfi is supposed to collate this and show the cumulative data on its website.
Citibank N.A. continues to be the biggest distributor in terms of MF commissions. Among the top 10 distributors, SPA Capital Services Ltd saw the biggest jump. In 2013-14, it earned 121 crore, up from 50 crore a year ago. Hongkong and Shanghai Banking Corp. Ltd saw the biggest fall. It’s commissions fell to 83 crore from 144 crore a year ago. Among the national distributors, NJ IndiaInvest Ltd dominates, at least in terms of commissions—in 2013-14 it has earned 149 crore.
The year ahead is going to be tricky for distributors and the MF industry alike. While rising equity markets have already seen many closed-end schemes launched (these pay more than open-ended schemes), the recent Budget proposals have put a dampener on debt, gold and international funds. The threshold for non-equity schemes to claim long-term capital gains tax exemption has gone up to three years, from a year. It remains to be seen how much this will affect distributors’ income, as short- to medium-term debt funds may go out of favour.
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