Financial Year (FY) 2015-16 was a good year for mutual fund houses. The industry’s Assets under Management (AUM) grew by 12%, from Rs 12.11 lakh crores in March 2015 to Rs 13.55 lakh crores in March 2016. Despite such growth in the asset base, the branch network of mutual fund houses has become contracted. In FY 2015-16, mutual fund houses closed down almost 46 offices nationwide. As a result, the branch network of the mutual fund industry shrank to 1,548 from 1,594. On a net basis, mutual funds shut 11 offices in Maharashtra alone followed by 6 in Gujarat and five each in Karnataka and West Bengal.
 

• Cases of mergers and takeovers are on the rise. The acquiring companies often close down branches of the acquired companies when the former has a branch in the same locality and the volume of business is not high enough to run them both.
• Cost cutting and systematisation of offices has also lead to the number of branches coming down. Many fund houses prefer to have one big office in a city instead of having three smaller officers, as a few experts opine.
• As per the data published by the Association of Mutual Funds in India (AMFI), 63% of liquid, 42% of debt, and 14% of equity assets come through the direct route. Barring equity, institutional investors dominate most of all the other categories, and they mainly prefer the direct route. More often, their investments are centralized meaning done from one location. This could be another reason for the fall in the branch network.
• Although the AUM of mutual fund houses has grown in FY 2015-16, the proportion of retail investors in the AUM has declined from 46.2% in March 2015 to 45.4% in March 2016, as the AMFI data suggests. Mutual funds usually slow down office expansions when incremental business becomes hard to come by.
• These days, almost all Asset Management Companies (AMCs) are encouraging investors to invest online and are also offering other brighter means of investing. This gives AMCs an option of not opening new branches when they are economically unviable.
• Many fund houses, especially those promoted by banks, use the bank’s branches to promote their products and save cost on having their offices.

PersonalFN believes that balancing between branch network expansion and cost cutting has become increasingly difficult for mutual funds. Higher rental costs in tier-I cities make it even harder to run branches profitably. Having said this, PersonalFN also believes acquiring branches at the right locations assists mutual fund houses in serving their clients and distributors well. Smaller industry players find it even harder to expand their network for the want of financial resources. However, mutual fund houses would be better off educating investors on using technologically equipped platforms to make investments. This could cut costs on having brick-mortar offices.

Do you as an investor visit an Asset Management Company’s branch for transacting in mutual funds. Share your experience by writing a comment below...
 

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