Local MFs back in asset growth

Officials of India's largest fund houses say domestic investors tend to prefer established local names when it comes to investing in tough times

Domestic mutual fund (MF) houses are back in the game. After losing to their foreign counterparts (having presence in India) for two years, local MFs did better in terms of a rise in their assets under management (AUM) in 2012-13.

The year gone by, which proved to be one of the toughest periods for the sector, saw local players gain 23.5 per cent in their assets, to Rs 7.24 lakh crore. This has surpassed the AUM growth of foreign entities, which could manage a rise of 17.6 per cent during FY13. The sector’s average growth was 22.8 per cent.

Top officials of India's largest fund houses, who spoke on condition of anonymity, said Indian investors tend to prefer established local household names when it comes to investing in tough times.

“Trust and track record are the top factors which play a decisive role for investors in choosing fund houses,” added the  managing director of a domestic fund house, which is among the top players.

However, independent analysts do not agree. “It is not  that the brand value of foreign houses are not matching with local players. There are quite a few overseas players which enjoy reasonable comfort of Indian investors,” said a senior fund research analyst at an independent firm that tracks the sector.

“What I feel is that FY13 was clearly a year of debt funds. There was huge inflow in the debt category, which inflated debt assets big time. The fact that several large local names have offerings in the debt side, be it HDFC, SBI or Birla Sun Life, among others, means the rise in debt assets helped domestic players emerge as beneficiaries,” he added.

In FY13, India’s benchmark equity indices gave a return of 10.4 per cent, amid high volatility. This kept the retail equity investors away from investing in stocks and related instruments. On the other hand, the debt side of the sector saw a surge of inflows, pushing the overall assets of the sector by a pace not seen in three years.

Interestingly, in the previous financial year, at a time when the sector’s assets had declined by a little over five per cent as local MFs failed to grow, foreign players managed to continue with their lead, growing six per cent.

There are 44 entities in the sector. Domestic fund houses include HDFC MF, Reliance MF, ICICI Pru MF, UTI, SBI MF, LIC MF and Birla Sun Life MF. Among the foreign ones are HSBC AMC, Mirae Asset, Baroda Pioneer, Franklin Templeton, Goldman Sachs, JP Morgan and BNP Paribas.

As on March 31, 2013, the overall average AUM of the sector was Rs 8.16 lakh crore against Rs 6.64 lakh crore in the previous financial year.