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Retail investors shun direct mutual plans

V. Ramesh in Calcutta on Saturday. Picture by Kishor Roy Chowdhury

Calcutta, Feb. 1: Retail investors remain wary about direct plans of mutual funds despite their better returns.

The direct plans are aimed at investors who do not wish to use the services of an intermediary — that is, an agent who earns commissions.

Direct plans were introduced in January last year.

During the October-December quarter, the share of direct plans increased to 30 per cent of the mutual fund industry’s asset under management (AUM) from 26 per cent in the July-September period.

The growth, however, has been led by institutional investors and high net worth individuals.

V. Ramesh, deputy chief executive of the Association of Mutual Funds in India (Amfi), said more than 80 per cent of the subscription of direct plans had come from investors who were more informed about the market and could directly approach the fund houses.

“Retail investors, who want to avoid the hassles of having to track their investment and have no online platform for the transactions, will still need the necessary guidance from the distributors,” Ramesh said on the sidelines of an Indian Chamber of Commerce event here today.

Vikas Sachdeva, chief executive officer of Edelweiss Asset Management, said the annual distributor commissions on mutual funds ranged from 5 to 10 basis points of the net asset value every year.

“This is not there in the direct plans,” Sachdeva said, adding that even though retail investors with a long-term investment horizon can save more, they are looking to forego this for guidance from the distributors to tackle market volatility.

 
 
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