MF debt assets shrink due to risk-aversion triggered by IL&FS crisis

The year has been a mixed bag for the mutual fund (MF) industry. While equity assets continue to grow at a healthy clip, the debt segment has seen a de-growth primarily due to the risk-aversion triggered by the IL&FS crisis. 

Overall, the mutual fund industry has reported a five per cent growth in assets under management (AUM) to Rs 24 trillion at the end of November (November 2017-November 2018 period) from Rs 22.8 trillion a year ago. Equity AUMs grew at 13 per cent to Rs 8.3 trillion while debt AUMs declined by two per cent to Rs 13.11 trillion.

About 24 fund houses have seen a decline in their debt AUMs in the past one year. However, some fund houses have managed to buck the trend.

HDFC MF, SBI MF and Franklin Templeton MF saw the highest addition in debt assets in the past one year ended November 30, 2018, data from Value Research shows. They have added assets to the tune of Rs 470 billion, Rs 154 billion and Rs 104 billion, respectively. Among the smaller and mid-sized fund houses, Edelweiss MF and Mirae Asset MF saw the most addition in debt assets at Rs 10.8 billion and Rs 10.7 billion, respectively.

Debt assets are less sticky than equity assets. Besides, fees for managing debt schemes are lower and can range from 5-100 bps compared with 100-150 bps for equity schemes.

In October, investors had pulled out money parked in liquid schemes amid fears of contagion risks from the IL&FS crisis.

Source: Value Research, Amfi

Note: Debt AUM includes income, liquid and gilt scheme; Equity AUM includes Pure equity, arbitrage and ELSS schemes