The mutual fund (MF) sector appears set to break all its previous records this calendar year.
Its total of assets under management (AUM), net inflows and gross sales in equity schemes are hitting all-time highs. So has the number of equity new fund offers (NFOs). In the 10 months from January to October, the Rs 11 lakh crore fund sector has successfully marketed a massive 55 equity NFOs. This is the highest ever, surpassing the boom year of 2007 when fund houses brought in 48 equity NFOs.
All this is, clearly, resulting from the steep rally in Indian shares. Put together, they’ve managed to garner Rs 8,623 crore, a six-year high, of investors’ money. Though, compared to what it used to raise during 2005-2008, the assets currently being garnered are nowhere near, sector executives say.
This has started reflecting in the rising pace of asset gathering. Against the total of Rs 3,326 crore the sector raised in the first half of the current calendar year, the four months from July to October saw Rs 5,300 crore.
What is unique is the strong and unexpected return of close-ended equity schemes from fund houses' kitty of products. Nearly two in every three equity NFOs is a close-ended product , or 35 of the total of 55, with a lock-in period of two to five years. Experts say this will rise.
According to Niranjan Risbood, director (fund research), Morningstar India: “The markets have improved and people are willing to put in fresh money. Since a majority of these funds are close-ended in nature, with much better commissions, distributors are also pushing these products. I see this continuing, as new launches are an easy way to get money in a rising market in India. There will be more such funds coming with lock-in periods.”
In fact, of the total mobilised money through new offers, a considerable Rs 6,500 crore has come in close-ended schemes. Those in the open-ended category, 20 in number, could gather only Rs 2,112 crore.
Among the fund houses that came up with closed equity products are ICICI Prudential AMC, Reliance MF, Birla SunLife MF, Sundaram MF and L&T MF.
India's sixth largest fund house, SBI MF, is also coming up with a second series of its Equity Opportunities Fund, a close-ended scheme with a three-year lock-in.
As of October 31, the MF sector offered 390 equity schemes (including equity-linked savings schemes), of which 58 are close-ended. The overall AUM under the equity category was Rs 2.97 lakh crore.