The uptrend in the Indian mutual fund industry continues. The June quarter’s average assets under management or AUM (excluding fund of funds) posted a record rise of 9.05%, or by Rs 819.57 bn, to Rs 9.87 trillion, according to the Association of Mutual Funds in India (AMFI). Growth was driven by rise in assets of equity funds, short-duration debt funds and fixed maturity plans (FMPs), according to a latest Crisil report.
Equity funds witness record rise in AUM led by improved sentiment
Equity mutual funds saw record absolute rise in average AUM – up by Rs 330.07 bn or 16% to Rs 2.36 trillion led by mark to market gains and inflows. The equity funds’ contribution to the gains in the industry assets was the highest among all categories. The latest gain was also the third consecutive gain for the category, and was primarily led by improvement in sentiment for the underlying asset class on hopes of strong economic reforms by a stable majority government at the centre. The domestic equity market (represented by CNX Nifty index) surged 13.53% in the latest quarter.
FMPs’ assets also see record high
Assets of FMPs continued to ride to record high levels with a rise of 12%, or by Rs 186.43 bn, to Rs 1.74 trillion. Penchant for FMPs can be contributed to the prevailing high interest rate in the economy as it helps investors to lock their investments at higher yields in closed-ended funds. Yields on the one-year commercial paper (CP) and certificate of deposit (CD) traded at 9.26% and 8.91%, respectively, at the end of June 2014, up significantly from 8.76% and 8.15% a year ago.
Shorter duration (maturity) funds report gain
Shorter duration funds - which include money market funds, ultra-short term and short-term debt funds - reported a rise in assets (consolidated) for the third consecutive quarter as investors preferred investing in these categories since they are less sensitive to interest rate uncertainty vis-à-vis longer duration funds. Prevailing high interest rates also aid sentiments for the short maturity debt fund categories. Consolidated assets of the category rose almost 11.87%, or by Rs 469.03 bn, to Rs 4.42 trillion. Individually, assets of ultra-short term funds rose by Rs 136.69 bn (highest since September 2012) to Rs 974.31 bn, liquid / money market funds by Rs 286.89 bn to Rs 2.69 trillion and short term debt funds by Rs 45.46 bn (largest gain in the last four quarters) to Rs 751.15 bn.
Infrastructure Debt Funds assets’ rise
Infrastructure debt funds (IDFs), which have recently commenced business, have started declaring their average asset numbers that stood at Rs 10.23 bn in June, up compared with Rs 5.83 bn at the end of March.
Longer maturity debt funds see record fall in average AUM
Longer maturity funds - long term debt and gilt funds - posted the worst decline in average AUM since the September 2010 quarter (when AMFI started declaring average AUM) in the latest quarter as investors avoided the category due to uncertainty of interest rate. Long term debt and gilt funds’ average AUM fell by a record Rs 161.68 bn and Rs 9.54 bn to end the quarter at Rs 785.22 bn and Rs 59.13 bn respectively.
Gold ETFs lose sheen
Average AUM of gold exchange traded funds (ETFs) fell for the third consecutive quarter, down by Rs 8.53 bn or 9.37% to Rs 82.47 bn, due to outflows led by subdued performance by the underlying asset. The category witnessed monthly outflows from June 2013 to May 2014.
Share of direct plans increases to 34%
The share of direct plans increased to 34% of the industry’s AUM (excluding fund of funds) in the reported quarter vis-à-vis 33% in the previous quarter. In terms of growth, the average AUM of direct plans rose around 15% (Rs 440.83 bn) to Rs 3.39 trillion from Rs 2.95 trillion in the March quarter. Direct plans came into existence on January 1, 2013 after the Securities and Exchange Board of India (SEBI) asked fund houses to provide informed investors direct access to mutual fund schemes sans any distributor cost.
Top mutual funds by average AUM log highest gains
Top mutual funds in terms of average AUM posted highest absolute gains in the June quarter. HDFC Mutual Fund’s average AUM retained its top position across fund houses and was the best performer in the June quarter. The fund registered highest absolute rise of Rs 170.73 bn (or 15.11%) to Rs 1.30 trillion. Increase in the fund house’s assets was also boosted by acquisition of Morgan Stanley Mutual Fund, which held Rs 25.72 bn of average AUM as of March 2014. ICICI Prudential Mutual Fund maintained the second position at Rs 1.18 trillion; it saw the second highest absolute gain - up Rs 112.34 bn or 10.52%. Reliance Mutual Fund maintained third rank with the asset tally at Rs 1.13 trillion; its average assets moved up 9.05% or by Rs 93.73 bn. In percentage terms, Goldman Sachs Mutual Fund saw the highest rise of 64% to Rs 61.79 bn. AMCs, which witnessed a major fall in AUM, included JPMorgan Mutual Fund whose average AUM fell by Rs 17.04 bn to Rs 145.44 bn, and LIC NOMURA Mutual Fund whose average AUM fell by Rs 10.95 bn to Rs 94.89 bn.
Out of the 45 fund houses (including IDFs) that have declared their average AUM, 35 posted a rise in AUM. The share of the top five mutual funds’ assets rose to 55% in the June quarter from 54% in the previous quarter while the share of top 10 funds’ assets was 78% (same as the previous quarter). The bottom 10 fund houses continued to occupy less than 1% of the average AUM.
Mutual Fund Update
Kotak MF files offer document with SEBI to launch Kotak Banking ETF
Kotak Mutual Fund has filed an offer document with SEBI to launch Kotak Banking ETF, an open-ended exchange traded fund. It will be benchmarked against CNX Bank Index and will be managed by Deepak Gupta.
Principal Fin buys Vijaya Bank's 4% stake in AMC
US-based Principal Financial Group has acquired 4.03% of Vijaya Bank's stake in Principal PNB Mutual Fund. The Group has also acquired five per cent stake in the trustee company. The Group has been in a joint venture (JV) in the Principal PNB AMC with Punjab National Bank and Vijaya Bank since May 2004. Now, with Principal's consolidation of its holdings in the JV, Vijaya Bank is left with no stake in the AMC, while PNB's holding in the mutual fund is reduced to 30%. Principal now has 70% holding in the JV. As on March 31, assets under management of Principal PNB AMC stood at Rs. 4,134 crore.
Change in exit load announced under Kotak Bond Scheme
Kotak Mutual Fund has announced change in exit load structure under Kotak Bond Scheme, an open-ended debt scheme, with effect from July 7. Accordingly, the exit load structure will be nil.
UTI MF announces change in exit load structure under various schemes
UTI Mutual Fund has announced change in exit load structure under UTI Mid-Cap Fund, UTI Banking Sector Fund and UTI Infrastructure Fund with effect from July 1. Accordingly, the exit load will be 1.00% if redeemed or switched out within 548 days from the date of allotment and nil thereafter.
Change in exit load announced under Birla Sun Life Dynamic Bond Fund
Birla Sun Life Mutual Fund has announced change in exit load of Birla Sun Life Dynamic Bond Fund, an open-ended income scheme, with effect from July 3. Accordingly, the exit load will be 0.50% if redeemed or switched out within 270 days from the date of allotment and nil thereafter.