HNI accounts in MFs at record high

The number of high net worth individuals’ (HNIs’) accounts in India’s mutual fund (MF) sector has hit an all-time high.

Against a little more than a million accounts under the HNI category at the end of 2013-14, around the time the Narendra Modi government was elected, the sector had a little over 2.5 million (mn) such accounts in its investors’ base at the end of 2016-17, a rise of 140 per cent.

Of the total of 55 mn MF accounts, HNIs folio count is less than five per cent. However, the assets owned by these investors is high at a little over ~4.75 lakh crore or 27 per cent of the sector’s overall assets. HNIs, according to the Association of MFs in India, are defined as individuals investing ~5 lakh or above. Below this threshold, investors are categorised as retail.

On an initial reading, it appears more HNIs are taking the MF route to wealth creation. Further analysis also reveals that several who had been earlier categorised as retail (their investment was less than ~5 lakh) have entered the HNI category, with their continuous investments all these years, with an additional benefit of markto-market (revaluing of assets at current prices) impact. The Indian share market is now at a historic high.

Sector officials also say it is a result of the much higher returns by several MF schemes in the past three years and new investors coming in. G Pradeepkumar, chief executive officer of Union Asset Management Company, says, “A lot of smart money has come into the markets through MFs over the past few years. Interest from HNIs is high, as several other asset classes have not been doing good. The rising number of such investors is because of the combination of a mark-tomarket impact and fresh money coming in.” In essence, then, several are turning into HNIs through their investments in MFs. Fund houses have continuously been advising investors that no other investment vehicles but funds are the largest wealth creator in the long term.

A chief investment officer, who turned down a request to be named, said: “If you look at the average ticket size of an SIP (Systematic Investment Plan), it has more than doubled from ~1,500 once to ~4,000. Investors are topping up their investments and thereby you see a surge in assets.”

Currently, the largest number of HNI accounts are in the equity-oriented category, with 1.17 mn folios having an overall asset of ~1.74 lakh crore. It is followed by debt funds at 0.91 mn accounts, controlling ~2.24 lakh crore of assets.