Skin in the game. How much have AMCs, sponsors invested in their own mutual funds?

To show their belief in own offerings, crafty owners often eat at their own restaurants and thus take pride in having proverbial ‘skin in the game’. In India’s ₹40-lakh crore mutual fund industry, do AMCs and sponsors do the same i.e. bet money on their own schemes? An analysis of data put out by MF industry body AMFI shows that the latest market value of AMCs/Sponsors’ investments in schemes stands at about ₹5,000 crore, led by Motilal Oswal MF, SBI MF, ICICI Pru MF, HDFC MF and ABSL MF. Here are the details.

The biggest backers

The sponsor is the main body that establishes the mutual fund. The sponsor can be compared to a promoter of a company. The sponsor or asset management company (AMC) is required to invest not less than one per cent of the amount which would be raised in the new fund offer or ₹50 lakh, whichever is less in the growth option of the scheme, a Sebi circular said in June 2020. For such schemes where the growth option is not available the investment shall be made in the dividend reinvestment option of the scheme. According to AMFI website data, there are over 700 schemes across 30 mutual funds where AMC/sponsor has made investments. Here are the top-10 players in terms of disclosed market value.

While absolute figures do give a picture, a better way to look at this is through the lens of market value of these investments as a percentage of respective average assets under management (September 2022). While Motilal Oswal still reigns supreme, PPFAS, IDFC, PGIM, HSBC and Quant occupy the next positions. Here is a chart that illustrates the top-10 in this regard.

Biggest individual schemes bets

Across fund-houses, AMC/sponsor investments seem to be concentrated across certain schemes. This can be due to various reasons such as preference for the fund, absolute size of the fund, etc.

In terms of such investments’ absolute market value, the top-5 slots are occupied by Motilal Oswal Flexi Cap Fund(₹624 crore), Motilal Oswal Midcap Fund (₹Rs552 crore), Motilal Oswal Focused 25 Fund (₹212 crore), Motilal Oswal Large and Midcap Fund (₹159 crore) and Parag Parikh Flexi Cap Fund (₹109 crore). The biggest one in the large cap equity segment, as per this data, is Axis Bluechip Fund (₹49 crore). Similarly, the biggest in the tax-saving fund category is Axis Long Term Equity Fund (₹44 crore). In the value-oriented equity funds side, ICICI Pru Value Discovery is ahead of peers with ₹33 crore.

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In terms of hybrid schemes, SBI Equity Hybrid Fund (₹ 71 crore) is top on the list, followed by HDFC Balanced Advantage Fund (₹Rs61 crore), etc. On the debt side, IDFC Ultra Short Term Fund (₹56 crore) is the leader in its category, followed by SBI Liquid Fund (₹42 crore), IDFC Bond Fund - Short Term Plan (₹29 crore).

With actively-managed funds facing a cap on launches due to SEBI’s strict categorisation rules, AMCs increasingly sing paeans about passive investing (index funds, ETFs and fund of funds) to investors. However, they seem to have walked only a little in those terms. Out of the AMCs with the biggest number of schemes, we found 4 fund-houses where there was any semblance of AMC/sponsor investments.

In ICICI Pru MF, ICICI Prudential Nifty 100 Low Volatility 30 ETF FOF (₹1.43 crore), ICICI Prudential Passive Multi-Asset Fund of Funds (₹98 lakh) and ICICI Prudential Thematic Advantage Fund (FOF) (₹93 lakh); in HDFC MF, HDFC Asset Allocator FoF (₹2.46 crore), HDFC Developed World Indexes FoF (₹1.37 crore) and HDFC Dynamic PE Ratio FoF (₹1.19 crore) are examples; in Kotak Mahindra MF, there are Kotak NASDAQ 100 FoF (₹1.8 crore), Kotak Global Innovation FoF (₹1.51 crore), Kotak Multi Asset Allocator FoF - Dynamic and Kotak International REIT FOF which also have some investments.