The mutual fund industry has seen a big fall in the assets under management – you can google for the numbers. These have been caused by a combination of reasons – advance tax payments, new debt instrument valuation norms, equity redemptions….the industry itself is shrinking perhaps?
What really beats me is the legitimate earnings in this industry is only 1% of the AUM – which means a fund house with about 25,000 crores earns about Rs. 250 crores. One fund house is willing to pay 1% TRAIL COMMISSION (the dumb wit I am, I have no clue where this trail commission comes from) Now you need to provide for about 50 offices, fund manager and sales guy’s salaries, other expenses like depreciation, etc. So clearly it cannot be a profitable business…but look at the number of fund houses with AUM far lesser than Rs. 25k crores.
What to me is interesting is there are many people who are trying to gather all the mutual fund distributors under one banner – this again beats me. We are trying to copy the American system forgetting that in the USA most people use a system which allows a 5% load + a trail commission. In India under current regulations (if followed strictly) only banking and broking (both played out like a volume game) have any margins at all.
Is there some other income? Or am I missing something? No clue.
Of course one stupid assumption…people are in business to make money, not sure if it is always true. Seen toooooo many people doing business to build fiefdom….damn the shareholder.
Any vishesh tippani? anybody?
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