Direct plans now constitute 25 per cent of mutual fund AUM

Direct plans of mutual funds now constitute 25 per cent of the total industry assets under management (AUM) in the April-June 2013 quarter against 15 per cent in the previous quarter, a CRISIL Research report said on Monday.

Under direct plan, investors can directly purchase units of schemes from a fund house instead of going through a distributor.

Average assets under management (AUM) of direct plans offered by mutual funds rose by almost 70 per cent to Rs 2.14 lakh crore during the June quarter from Rs 1.27 lakh crore in the March quarter.

The Securities and Exchange Board of India (Sebi), the mutual fund regulator, has asked fund houses to declare net asset value (NAV) of direct plans separately. The NAV, or per unit price, of a scheme under the direct plan are higher than that of the regular plan as no distributor's fee is deducted from the unit price in the case of former.

Ever since its launch in January 2013, direct plans have attracted institutional players as Sebi had removed the differential fee structure under the regular schemes. The differential fee structure benefited large investors as mutual funds used to charge a lesser fee from them.

According to Crisil research, debt-oriented mutual funds constitute 98 per cent of the total AUM under direct plans. Within the debt category, liquid and ultra short term debt funds were the highest contributors to average AUM of direct plans with average assets of liquid funds rose by Rs 24,400 crore to cross the Rs 1 lakh crore during the June quarter.

Institutions and corporate houses contribute 80 per cent of the AUM towards liquid and money market funds.

A comparison of returns between direct and regular plans for the quarter-ended June 2013 shows that the long-term income funds outperformed by 0.76 percentage point on an annualised basis followed by equity linked savings scheme (ELSS) which outperformed by 0.65 percentage point. Direct plans of monthly income plan - conservative outperformed the regular plans by 0.64 percentage point was a close third.

Sandeep Sabharwal, senior director, capital markets, Crisil Research, says, "Higher returns from direct plans are an outcome of lower expense ratio for these plans as distribution costs are excluded."