MF Update: Geographical spread of mutual fund investors

To give a better insight into the flow of investments into mutual funds, investors are geographical segregated based on cities. Till January 2018, there were two types of cities, T15 and B15, which are abbreviations for Top 15 and Beyond Top 15. AMFI aims to attract investments into mutual funds from cities other than T15. The incentive for the fund houses was that they could charge higher expense ratio from the investments garnered from B15 cities.

It has been more than five years since this arrangement was introduced. In the last five years, MF investment has increased tremendously and hence SEBI has reviewed its policy. The regulator decided that the additional expense ratio of up to 30 basis points would be allowed for inflows from Beyond Top 30 cities, instead of Beyond Top 15 cities. With this, the additional incentive will no longer be payable to distributors in top cities ranked 16 to 30.

At the end of June 2018, 85.9 per cent of the total asset under management (AUM) was generated from T30 cities, whereas B30 cities generated 14.1 per cent of AUM. This is a slight increase from the month of May 2018, when B30 cities generated 13.8 per cent of AUM. Assets from B30 locations have increased from Rs. 3.23 lakh crore in May 2018 to Rs. 3.32 lakh crore in June 2018. The rate of increase in assets for B30 locations was 3 per cent.