Why do regular plans dominate some types of MFs, not others?

Mutual fund choices diverge as direct investors favour passives, while regular investors pick other categories

- Neil Borate & Jash Kriplani

Investors in direct mutual funds lean toward certain equity-fund categories, while regular-plan investors favour others. Direct plans are those that are bought directly from asset management companies, while regular plans flow through banks' distribution arms, national distributors or individual distributors—or a mix of these.

Mint analysed India's top 15 fund houses in terms of assets under management (AUM) to see which of their equity funds had a higher share of regular plans and which had a higher share of direct plans.

Data revealed that many funds launched in the past four to five years lean heavily on regular plans for their AUM, especially thematic and sectoral funds, as these account for most of the new launches in recent years. On the other hand, direct-plan investors have a preference for passive funds.

Regular plans

"India's mutual fund industry is still at the stage where it is in B2B (business-to-business) mode. Hence, new fund launches go through the distribution mode. Often, these are distributed through the associate platforms of the fund house," said a senior executive at a fund house, who did not wish to be named.

Data shows that it is not just thematic and sector funds where the share of regular funds is on the higher side, but also broad-based fund categories such as multicap funds and multi-asset allocation funds, as these categories have also seen some new launches in recent years.

According to data from the Association of Mutual Funds in India, six of the top ten mutual fund distributors in AUM terms are banks and their subsidiaries. This is according to data as of 31 March 2024. The latest figures are yet to be released.