Retail investors share in equity AUM pie shrinks for third straight year

The share of retail investors in the total assets under management (AUM) of equity mutual fund (MF) schemes has dipped in the past three consecutive years despite retail AUM more than doubling during this period.

The share of retail AUM in equity schemes, which stood at 55 per cent at the end of the financial year 2020-21 (FY21), has come down to 52.8 per cent in FY24, according to data from the Association of Mutual Funds in India (Amfi). The AUM in absolute terms has surged from Rs 5.5 trillion to Rs 12.4 trillion.

In the same period, the share of high net-worth (HNI) investors rose from 35.5 per cent to 38.3 per cent, with their AUM increasing from Rs 3.6 trillion to Rs 9 trillion.

Equity MF schemes have seen a surge in investors’ interest in recent years amid a bull run in the equity market.

The investments through systematic investment plans (SIPs) have shown consistent growth in the past three years. The monthly gross SIP inflows have more than doubled since March 2021 to nearly Rs 21,000 crore in May 2024.

According to Amfi, any mutual fund investment account, which receives over Rs 200,000 in a single installment is considered an HNI account.

The rest of the non-institutional investment accounts are labelled as retail.

“Indian investors have always been debt-heavy but with growing financial awareness they are getting comfortable with equities. In the past 3 years, the number of portfolios of HNIs in equity-oriented schemes has seen almost 100 per cent growth. In the last 3 months, the rise has been close to 8 per cent. The participation of HNIs from B30 cities has also increased significantly with 27 per cent of HNIs investing directly. Behind this shift in asset class preference, regulator Sebi, industry body AMFI along with AMCs and distributors have played a huge role,” said Feroze Azeez, Deputy CEO, Anand Rathi Wealth.

The data shows that on average HNI investors had Rs 1.1 million in their equity MF investment account (folio) compared to Rs 100,000 in the case of retail folios.

Overall, individual investors (retail and HNI) continue to command the lion's share in the active equity AUM at 91 per cent.

In hybrid schemes too, their share is 84 per cent. In contrast, debt funds and passive funds have institutional dominance. Debt funds having the shortest horizon like liquid funds and money market funds had over 80 per cent institutional investment.

In gilt funds, corporates accounted for 51 per cent of the Rs 32,000 crore AUM in March 2024. HNIs were the second-biggest investor category with a 44 per cent share. The holding pattern was similar in other debt schemes and index funds.

Exchange-traded funds (ETFs) with an AUM of 6.6 trillion stood out in terms of investor mix. Institutional investors, which include the Employees’ Provident Fund Organisation (EPFO), account for nearly 91 per cent of the AUM.

As of March 2024, retail investments stood at only Rs 14,417 crore, while HNIs’ holding was Rs 47,863 crore.