Mutual funds are in the form of Trust (usually called Asset Management Company) that manages the  pool of money collected from various investors for investment in various classes of assets to achieve certain financial goals.  We can say that a Mutual Fund is a trust which  pool the savings of a large number of investors,  reinvests those funds for earning profits and then distribute the dividend among the investors.    In return for such services,  Asset Management Companies charge fees.

The most important takeaway from a study done on AMCs in 2014 is that the larger, richer AMCs are able to leverage their existing size and strength to pull even further ahead of the rest

Historically, the margins for global asset management industry have been healthy — around 30 per cent.

This translates to a healthy return on equity (ROE) for the players, which can be over 30 per cent during prolonged bull phases. As a result, there is minimal need to borrow money (use debt) to finance operations. In fact, it is these economic characteristics that make even small asset management companies profitable.

Unfortunately, the story may be somewhat different for the Indian mutual fund industry, which displays dichotomy.

While the large asset managers such as HDFC AMC are extremely profitable with ROE of over 40 per cent, many of the smaller ones continue to make losses.

This is primarily due to high distribution costs and the regulatory regime.

Other regulations:

During the year, the following important developments took place in the Mutual Fund Industry:

A. Key SEBI Regulations and Guidelines:

1) SEBI notified new listing regulations known as SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Regulations) which are applicable to Mutual Funds and Asset Management Companies.

2) SEBI modified the Product labeling requirements in Mutual funds and increased the level of risk investment in mutual fund schemes from 3 to 5 levels.

3) SEBI notified Foreign Accounts Tax Compliance Act (FATCA) and Common Reporting Standard Rules. 4) SEBI amended prudential limit in sector exposure and introduced new limits on group exposure limits in debt-oriented mutual funds schemes.

5) Introduction of various disclosure requirements for mutual funds towards enhanced scheme related disclosure requirements in the Statement of Additional Information (SAI) and Key Information Memorandum (KIM) documents of mutual fund schemes. In additional, key information of the schemes managed by the Asset Management Company is also required to be updated as a dash board on the website of the fund. The disclosure of executive remuneration and soft dollar arrangements was also made mandatory.

6) SEBI issued fresh guidelines on treatment of unclaimed redemption and dividend amounts.

B. Changes introduced by Union Budget 2016:

1) The capital gains tax on transfer of units in case of merger or consolidation of plans of mutual fund scheme was removed.

2) The services provided by Mutual Fund Agents / Distributors to a Mutual Fund or Asset Management Company were made liable to Service Tax under the forward charge mechanism with effect from 1st April, 2016.

3) Income Tax Surcharge was increased from 12% to 15% on persons other than Companies, Firms and Cooperative societies having income more than ` 1 Crore.

4) Krishi Kalyan Cess @0.5% has been introduced on all services effective from 1st June, 2016

Sneha Ramammurthy

Research- Dilzer Consultants Pvt Ltd

MF Name Promoter/ Sponsor Custodian AUM in Cr Paid up capital No. of years in service Profits Breakeven (Y/n) Reserve Capital
Jun-16 Sep-16 Cr Cr Cr
 1. ICICI Prudential Mutual Fund Prudential PLC Citibank / Deutche / HDFC Bank      193,296       215,986    167,224 23 502.7 Y 619.6
2. HDFC Mutual Fund HDFC Limited Deutche Bank      192,776       213,086        25.16 17 477.88 Y 47.79
3. Reliance Mutual Fund Reliance capital limited Deutche Bank      167,009       183,129              42 21 376.43 Y 1404.04
 4. Birla Sun Life Mutual Fund Adithya Birla Financial Services and its nominees Citibank NA      149,093       168,881              18 13 209.49 Y 812.16
5. SBI Mutual Fund SBI Citibank NA      119,878       131,554              50 24 165 Y 580.91
6. UTI Mutual Fund  ( 2014-15 ) data  UTI Trustee Company Private Limited, Stock Holding Corp of India      112,169       127,333            126 14 201.26 Y 1209.49
7. Kotak Mahindra Mutual Fund Kotak Mahindra Bank limited Deutche Bank         62,874         70,387            118 22 59.33 Y 79.78
8. IDFC Mutual Fund IDFC Limited Deutche Bank         54,091         56,656                 3 15 70.37 Y 22.68
9. DSP BlackRock Mutual Fund DSP HMK Holdings Pvt. Ltd & DSP Adiko Holdings Pvt. Ltd (collectively) & BlackRock Inc. Citibank         41,416         49,852              20 20 77.36 Y 486.83
10. Franklin Templeton Mutual Fund ( 2014-15 )  Franklin Templeton India Citibank NA         67,593         73,666                 1 16 0.51 Y 0.48
11.Axis Mutual Fund Axis Bank Ltd Deutche Bank         40,868         47,179            210 7 7.96 Y -85.75
12. Tata Mutual Fund Tata Sons Limited Deutche Bank         35,332         39,691              16 22 5.25 Y 155.03
13. Sundaram Mutual Fund Sundaram finance Limited HDFC Bank         24,536         26,700              20 19 21.69 Y 114.05
14. DHFL Pramerica Mutual Fund PGLH of Delaware Inc Citibank NA         21,740         24,473            312 8 -32.61 N -249.15
15. Invesco Mutual Fund  (2014-15 ) Religare Enterprise Ltd Deutche Bank         19,039         22,560              79 10 -147.95 N 0
16. LIC  Mutual Fund ( 2014-15) LIC of India Stock Holding Corp Of India         13,040         16,453              11 25 1.6 Y 94.6
17. JM Financial Mutual Fund  JM Financial Ltd HDFC Bank Ltd         12,756         13,612              59 23 44.48 Y 118.32
18. Baroda Pioneer Mutual Fund ( 2013-14 ) Pioneer Global Asset management Ltd , Spa Citibank NA           9,117         11,703              88 22 -9.82 N -21.78
19. Canara Robeco Mutual Fund Canara Bank HSBC           8,099            9,320              50 23 15.19 Y 76.78
20. HSBC Mutual Fund HSBC Securities and Capital markets India Pvt Ltd SCB           7,839            8,503              62 15 10.51 Y 10.99
21. IDBI Mutual Fund (2014-15 ) IDBI Bank Stock holding Corp of India           6,719            8,128            200 5 -21 N -106.31
22. Goldman Sachs Mutual Fund GSAM India Holdings Ltd           6,500            7,099            142 8 -7.45 N -69.53
23. Indiabulls Mutual Fund IndiaBulls housing finance ltd HDFC Bank Ltd           6,231            6,731              70 15 1.89 Y -5.9
24. Motilal Oswal Mutual Fund Passionate investment Management pvt ltd HDFC Bank Ltd           5,421            6,393              14 10 46.74 Y 579.26
25. BNP Paribas Mutual Fund ( 2014-15) BNP Paribas Invetsment partners Asia Ltd           5,411            6,069            210 12 6.86 N 33.01
26. Mirae Asset Mutual Fund Mirae Asset global Investment Co Lot , Korea Deutche Bank           3,977            5,235            203 10 2.12 Y -75.95
27. PRINCIPAL Mutual Fund Principal Financial Services SBI           4,666            5,136              17 24 -13.43 y 43.24
28. BOI AXA Mutual Fund Bank of India Deutsche Bank AG           2,754            3,636            193 9 -17.54 N -137.29
29. Union KBC Mutual Fund (2013-14) Union Bank of India Citibank           3,124            3,387              95 7 -34.5 N -21.96
30. Taurus Mutual Fund HB Portfolio Ltd SBI           3,196            2,663              15 23 12.97 Y 18.33
31. Edelweiss Mutual Fund Edelweiss Financial Services Citibank           2,032            2,256              60 8 -3.95 Y -2.55
32. Shriram Mutual Fund Sriram Credit Co Stock holding Corp of India                 40                  43              10 21 -2.94 Y 1.05
Total   1,434,117   1,603,356

Sources:

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