Investors flock to big, PSU MFs for investment safety

After a tumultuous time during the October liquidity crisis, investors might just be taking a “flight to safety”, banking on public sector mutual funds and the bigger names in the industry.

Corporate investors are shifting preferences in their choice of fund houses instead of chasing returns, distributors and officials said.

Investors are rushing to invest in public sector entity-sponsored fund houses with a view government may come to rescue and bail out in case of any unforeseen circumstances.

While PSU-sponsored fund houses are cashing-in on money, top mutual funds are also benefiting due to their brand name, expertise and fund management skills, industry officials said. “There has been a complete shift in the choice of investors. People have begun associating more with the bigger names. Choice of fund house has become the first criteria for investment followed by better fund managers and lastly, returns,” a senior official at a distribution house said.

October witnessed unprecedented redemption in liquid, short-term debt, and fixed maturity plans amid acute liquidity crisis that pushed interbank call money rate close to 22 per cent.

Doubts over FMP portfolios further added to the pressure leading to the investor sentiment taking a rough bruise. In the course of events, a study by Mumbai-based distribution house, which is famous for corporate reach, notes how only the big players have been consistent with their inflows.

According to this study, fund houses that have garnered sizeable business in November include Birla Sun Life Mutual Fund, ICICI Prudential Mutual Fund, HDFC Mutual Fund, Tata Mutual Fund and Reliance Mutual Fund.

What must be noted that the fund houses listed are among the top ten of the country and that in spite of witnessing a drop in their monthly average assets have remained in the good books of investors.

In November, average assets under management of the 35 fund houses in India fell by 6.91% to Rs 4.02 lakh crore over the previous month. The top 10 mutual funds’ average assets dropped 4.46% to Rs 3.074 lakh crore. Barring UTI Mutual and Tata Mutual, rest all fund houses suffered fall in average assets.

UTI Mutual Fund, LIC Mutual Fund and SBI Mutual that are among the public sector fund houses have seen sizeable inflows, a distributor said. An example of which would be the last quarterly FMP launched by SBI Mutual Fund that garnered Rs 1,700 crore in its new fund offer (November 20-25).

This huge success comes at a time when investors shunned FMPs due to a lack of clarity on likely norms. The crisis faced by the industry led to Securities and Exchange Board of India getting into the act and revising norms for close-ended mutual fund schemes.

“The mindset might be changing. Investors are sticking to Indian mutual funds while new money is definitely going to big names,” said the executive director of an investment advisory firm.

On Thursday, the regulator banned premature exits in close-ended schemes and made listing of such schemes compulsory. Among the other fund houses that held fort were JP Morgan Mutual Fund, DWS Mutual Fund, Kotak Mahindra Mutual Fund and Canara Robeco Mutual Fund, a distributor said. “Smaller fund houses will face problems,” said Juzer Gabajiwala, head, mutual fund distribution, Ventura Securities.