Because an AMC business is different from a wealth management business. IIFL Wealth does have an AMC component but it is primarily a wealth management player. HDFC AMC and Nippon Life AMC are pure play asset management companies. The differences have been covered in detail on this thread, happy reading 
Also covered here - VP Chintan Baithak Goa 2019 - Sector: Asset Management & Wealth Management
why wealth management cos ROE IS ALWAYS LESSER THAN pure asset management cos? because both does not need capital. where i am missing ?
Let’s arrive at the answer from basic unit economics and first principles…
ROE = Profit After Tax/Net Worth of the Company
Assume that an asset management company and wealth management company are both created on the same day with equity capital of 100 Cr and both have the same AUM of 1,00,000 Cr
For the asset management company the yield to AUM is say 0.55% which means the revenue will be 550 Cr. For the wealth management company assume the yield to AUA is 0.7% which means the revenue will be 700 Cr
Now look at profitability of an AMC vs wealth management company from what you observe practically. HDFC AMC is working at a PAT margin of 55% while IIFL Wealth is working at a PAT margin of 25%. These are actual FY20 ballpark numbers. So if you calculate the ROE, you can see why asset management is way more than wealth management for the same scale of business.
The more pertinent question is - why is AMC doing much higher profitability than the wealth management company? Both are not capital intensive but the unit economics for an AMC are way more superior beyond a threshold scale.
ROE is the final culmination of business economics, it should never be seen as the starting data point by itself for any kind of analysis
understood. thank you so much.
u mean AMC size is huge in terms of AUM , so they made more money.
Team of people got well correlated so can make research cost effective.
Not in case of Wealth management
Each PMS manager got to do on its own
ROE is function of leverage. IIFL wealth ROE looks suppressed because they raised fund to expand their LAP but market get reverse after that.
with the listing of UTI AMC how will impact the existing listing players
As yes bank is part of nifty this is due to HDFC etf automatically buying into it.
HDFC MF (Balanced Advantage Scheme) had invested 23.70 lakhs shares in Yes Bank QIP in August 2019 at a price of Rs. 83.55 (Rs. 2.00 FV + Rs. 81.55 Premium).
Yes Bank QIP Allottees.pdf (53.0 KB)
I have two points -
(1) Growth in SBI AMC is far better than HDFC AMC -
(2) Many good Funds under SBI AMC are performing far better than HDFC AMC (i.e. investors getting good return from SBI MF investment)
HDFC AMC growth is not too good as compared to its PE market is giving.
Looking at good de-merger opportunity of SBI AMC from SBI bank, why SBI bank is not a good buy?
From my personal experience, never ever bet on parent for the liking of its child. If you like SBI AMC, wait for it to list seperately or don’t buy anything else. Never buy SBI because of SBI AMC. The revenues/profits/risks of SBI is humungous as compared to its AMC which is insignificant to it. Moreover, if at all sbi lists it’s AMC, it will definitely be an IPO rather than a demerger as that will give the parent access to the money that banks always are hungry for.
This is not a buy sell advice. Only fundamental suggestion from my own experience. Thanks
This data needs further digging. I would be keen to see a breakdown of government/institutions/retail inflow for all of these Asset Management companies. Unfortunately AMFI website doesn’t have the March data yet. It might be EPFO money that is playing out. One can see the real market share changes after excluding government/EPFO inflows.
As new structures evolve which are more cost efficient, in addition to regulatory expense cuts, the traditional product earnings will probably continue to be gradually impacted.
AUM is key the revenue source for HDFC AMC.
Compared AUM disclosures made by company across historic time periods, I focussed on equity , hybrid (in past balance) & ELSS AUM as expense ratio is highest in these categories and this represents 40-45% of total AUM. ( Avoided going into minute calculations to save time)
Key observations on equity AUM :
disc: exited in last one monthHDFCAMC AUM.xlsx (11.8 KB)
Outside typical quality basket this one seem to be holding well and valuations ( with growth runway and RoCE etc) seems reasonable.
Largest portfolio holding - would add more on dips as long as SIP flows( financialization theme) runs well.
Stock prices have fallen a lot in the month of March, which is one of the reasons for fall in equity AUM. In April, so far, prices have risen a lot from the March lows. Just few days left in April, so equity AUM for April can be much higher than that of March (assuming no big fall in the next few days). Also liquid funds inflow / outflow is always volatile. We need to see the April month AUM
