CSK may be IPL champ, but MF champ is clearly the North!

Equity growth champion: North Zone

Table 1: Zonal AUM and CAGR

(YoY : year-on-year)

Key observations:

• The mantle of spearheading equity growth has passed on from West to the North. North has grown considerably faster than the country average – the equity bug seems to have caught on finally in the North – always a big market, but somehow not exploited fully by the fund industry.
• South – another large market and historically an underachiever for equity MFs, seems to be playing catch up rather well, with a CAGR that’s almost at the country average.
• Growth in West – the traditional equity bastion – has been relatively muted. Perhaps a case of low hanging fruit already being picked.
• East’s growth continues to be below average – perhaps it takes a lot more to convince this historically conservative set of investors to take an equity risk.

AMC-wise, zone-wise drill down of equity AuM growth

The table below gives you the fund house wise, zone wise growth in equity AuM over the last 3 years, ranked in descending order of percentage growth over these 3 years. Overall CAGR in green signifies above industry growth while red signifies below industry average growth.

Table 2: Equity AUM | Zone-wise and overall CAGR

Key observations:

• Out of the 38 MF houses which were evaluated, 18 mutual fund houses managed to post above average CAGR in terms of AUM growth over the 3 year horizon, while 20 were below average – quite an even split between out and under performers.
• Some of the toppers in the list, like Indiabulls and Essel clearly benefited from a low base effect, while others including Motilal Oswal, Edelweiss and Mirae have done well to cover significant ground in zones they were virtually absent 3 years ago, to post strong overall growth numbers.
• The outperformers list includes some equity heavyweights like ICICI Pru, Aditya Birla SL, Kotak, DSP, Axis and L&T – their above average growth is truly commendable
• Large equity players including HDFC, Reliance, UTI and FT will no doubt be somewhat disappointed to have grown below industry average.
• A look at the zone-wise growth rates for each fund house gives some useful pointers on whose sales efforts seem to have paid off handsomely. The growth in North for example seems to have been harnessed very well by majors like ICICI Pru and Aditya Birla SL, while not quiet as well by heavyweights like Reliance and FT.

Debt growth champion: South Zone

Table 3: Zonal AUM and CAGR

(YoY : year-on-year)

Key observations:

• The conservative South Zone unsurprisingly tops growth in debt funds, with North coming in a very close second. North’s appetite for MFs across asset classes seems to be growing strongly.
• One would have expected East to do better in debt, given its historically conservative orientation. Perhaps insurance and unregulated savings products continue to hold their sway in this region.

AMC-wise, zone-wise drill down of equity AuM growth

Table 4: Debt AUM | Zone-wise and overall CAGR

Key observations:

• Like equity, the proportion of out and under performers is fairly even on the debt side: 18 outperformers and 19 underperformers
• Among the larger fund houses, Kotak, SBI, Axis, L&T and Aditya Birla SL have posted commendable growth over the last 3 years.
• Reliance, ICICI Pru and HDFC – 3 out of the top 4 fund houses on overall AuM – have underperformed industry average in debt funds growth. Could this be a case of disproportionate sales focus on equity?
• FT’s rather disappointing growth of barely 4.5% CAGR over the last 3 years is another reminder for the industry that the market remains unforgiving on credit adventures even as it more readily forgives the odd equity misadventure.

Coming up next

There’s a lot more to see when we dive even deeper – into each zone and into states within each zone. That’s where we should get some real nuggets on what’s driving some fund houses’ growth stories and what’s holding back others. Stay tuned to the next 4 editions of this Deep Dive series, where we dissect each zone.

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