Mutual fund commissions surge on high inflows in FY18

The sharp increase in inflows into mutual fund schemes, especially equity-oriented ones, has resulted in a spike in commission payouts made by fund houses. Growth in gross commission payouts, including the amount taken as expense within mutual fund schemes, increased 52-88 per cent for top asset management companies (AMCs) in 2017-18. It went up by 31-91 per cent on a two-year CAGR (compounded annual growth rate) basis.

Interestingly, the rate of growth of gross commission received by top distributors, exceeded the growth rate of revenues of AMCs between 2013-14 and 2017-18. While commissions received by top distributors has recorded a 41 per cent CAGR between 2013-14 and 2017-18, revenues for some of the top AMCs have increased at a CAGR of 24-36 per cent.

Net inflows into equity mutual fund schemes (including equity-linked savings schemes) stood at around Rs 1.71 lakh crore in 2017-18, a nearly 2.5 times increase over 2016-17. SBI Mutual Fund has seen one of the highest growth in commission payouts in percentage terms among large AMCs. Total commission payouts by the AMC soared 88 per cent y-o-y to Rs 1,180 crore in 2017-18. Aditya Birla Sun Life Mutual Fund, which saw an 85 per cent y-o-y growth in total commission, came second and was followed by Reliance Nippon Life Asset Management (63 per cent), ICICI Prudential (60 per cent) and UTI (52 per cent).

“Commissions have gone up due to large inflows into equity schemes,” said A Balasubramanian, CEO, Aditya Birla Sun Life MF.

“A lot of closed-ended funds are also being launched where commissions are paid upfront,” he said. “Sales hit record highs in 2017. Commissions also went up sharply as they are a byproduct of sales,” said a senior industry official.

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