A
number of mutual fund houses are focusing on 'direct plan' mode to
sell their schemes, a move that may maximise the returns for the
investors as against regular plans involving distributors. Under the
direct plan mode, investors can directly invest in mutual fund
schemes without involving distributors or agents. They are required
to visit fund house website and follow the process to invest in such
schemes. Since no fees would have to paid to distributors, expense
ratio would be lower as compared to regular plans, which would
eventually give higher returns to investors. Almost all the mutual
fund houses provide direct plans, while big ones like HDFC MF,
Reliance MF, ICICI Prudential MF, Axis MF, UTI MF and Birla Sunlife
MF are planning to increase their shares through this route. Besides,
Quantum Mutual Fund only deals in direct plans.
Most of these fund
houses have specialised teams to look into these plans. In addition,
they are adopting digital modes such as internet and mobiles to sell
their MF products.
"Direct plans are purchased directly from MF houses, bypassing the distributor channel. The savings on commission are passed on to investors and fund houses do not have to give any fee to agents. Therefore, it is a win-win situation for Asset Management Companies (AMCs) as well as investors," Quantum Mutual Fund CEO Jimmy Patel said.
He said that institutional investors and high networth individuals (HNIs) are opting for direct plans as they are far more capable at taking informed investment decisions.
Further, retail investors are also shifting to these plans as awareness about their benefits have increased.
However, another MF expert said, "direct plans are only suited to those investors, who have sound financial knowledge and those who want to invest into simple schemes."
Patel said that direct plans are much more popular in the debt segment, mainly liquid funds. The agent's fee for liquid schemes is much lower than for equity funds and other debt schemes but the amount of investment in these funds is much larger. Overall, institutional investors and HNIs are opting for debt schemes, while retail investors are getting attracted towards equity schemes. Direct plans have come into existence since 2013 after the capital markets regulator Sebi asked fund houses to provide informed investors with direct access to MF schemes. Currently, there are 44 fund houses with an assets base of over Rs 13 lakh crore at the end of July.
"Direct plans are purchased directly from MF houses, bypassing the distributor channel. The savings on commission are passed on to investors and fund houses do not have to give any fee to agents. Therefore, it is a win-win situation for Asset Management Companies (AMCs) as well as investors," Quantum Mutual Fund CEO Jimmy Patel said.
He said that institutional investors and high networth individuals (HNIs) are opting for direct plans as they are far more capable at taking informed investment decisions.
Further, retail investors are also shifting to these plans as awareness about their benefits have increased.
However, another MF expert said, "direct plans are only suited to those investors, who have sound financial knowledge and those who want to invest into simple schemes."
Patel said that direct plans are much more popular in the debt segment, mainly liquid funds. The agent's fee for liquid schemes is much lower than for equity funds and other debt schemes but the amount of investment in these funds is much larger. Overall, institutional investors and HNIs are opting for debt schemes, while retail investors are getting attracted towards equity schemes. Direct plans have come into existence since 2013 after the capital markets regulator Sebi asked fund houses to provide informed investors with direct access to MF schemes. Currently, there are 44 fund houses with an assets base of over Rs 13 lakh crore at the end of July.
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