MFs see assets shrink in Q1 despite record gains for market indices

The average asset base in June quarter stood at Rs 24.6 trillion, as against Rs 27 trillion in previous quarter, translating into a decline of 8.9 per cent

Heavy outflows from debt schemes, combined with the slowdown in equity flows, have hurt the asset size of several fund houses. According to data from the Association of Mutual Funds in India (Amfi), 38 of the 40 mutual funds (MFs) reported a decline in average assets for the June quarter.

The decline in assets under management (AUM) has come at a time when the frontline indices — Sensex and Nifty — have seen their best quarter in 11 years.

“New investors, who have not gone through multiple equity market cycles, would have taken an exit amid the market recovery. Fund houses with a larger debt asset mix are still reeling from the negative sentiment following Franklin Templeton’s wind-up move,” said Joydeep Sen, consultant at Phillip Capital.

“Smaller-sized fund houses have seen a larger decline in percentage terms, given their smaller base,” he added.

The average asset base in the June quarter stood at Rs 24.6 trillion, as against Rs 27 trillion in the previous quarter — translating to a decline of 8.9 per cent.

 

In percentage terms, fund houses that saw larger dip in asset size were Baroda MF (38.1 per cent), JM Financial MF (33.7 per cent), Franklin Templeton MF (31.39 per cent), IDBI MF (25.22 per cent) and HSBC MF (23.06 per cent). The analysis excludes fund houses with lesser than Rs 2,000 crore in average asset size, in the previous quarter.

Industry observers say this indicates that investors have also been withdrawing funds from schemes of Franklin Templeton MF other than those wound up.

In absolute terms, Franklin MF saw the biggest decline of Rs 36,514 crore, followed by Birla Sun Life MF (Rs 32,929 crore), Nippon India MF (Rs 24,823 crore), ICICI Prudential MF (Rs 24,452 crore) and Kotak Mahindra MF (Rs 18,762 crore).

In percentage terms, the decline for most of these large-sized MFs was limited to 3-13 per cent.

A cut in asset size could impact the overall income for the MF industry, as lower assets mean lower asset management fees. However, if the asset reduction was limited to debt schemes, the impact could be limited as the yields on these schemes are smaller than those of equity schemes.