FUND FULCRUM

October 2017

Despite volatility in key market indices, the quarterly assets under management (AUM) of the mutual fund industry touched an all-time high of Rs.21 lakh crore in the second quarter of the financial year 2017-18. AMFI’s latest data shows that quarterly AUM of the mutual fund industry has reached Rs.20.95 lakh crore in the quarter ended September 2017. The quarterly average AUM of the mutual fund industry grew by 7% in September 2017 compared to the preceding quarter. In just three months, the quarterly assets of the mutual fund industry have reached an all-time high from Rs19.52 lakh crore in June 2017, a growth of over Rs1.43 lakh crore. Quarterly AUM is the average assets of the entire quarter, which is calculated by factoring in all working days of three months.

L&T Mutual Fund crossed the milestone AUM of Rs.50,000 crore in the second quarter of FY 2017-18. The fund house added close to Rs.8,265 crore to its kitty to reach Rs.52,750 lakh crore AUM in September 2017 as against Rs.44,484 crore in June 2017, a growth of 19%. In terms of size, fund houses like ICICI Prudential, HDFC, Reliance and Birla Sun Life, are still at the top, with the highest recorded AUM for the last quarter at Rs2.79 lakh crore, Rs2.70 lakh crore, Rs2.31 lakh crore and Rs2.25 lakh crore, respectively. However, in absolute terms, the fifth largest fund house SBI MF saw highest AUM growth of Rs.19,241 crore to reach 1.88 lakh crore in September 2017. The fund house saw 11% increase in its quarterly AUM. Other large fund houses such as ICICI Prudential Mutual Fund and Birla Sun Life Mutual Fund also witnessed healthy AUM growth in absolute terms. These fund houses added over Rs18,000 crore to their AUM kitty. In terms of percentage, emerging fund houses like IDBI, Motilal Oswal and Mirae Asset have recorded growth of 31%, 25% and 20%, respectively. The growth is largely due to sustained inflows in equity funds through SIPs and market gains. While fund houses have been receiving close to Rs.5,000 crore each month through SIP, BSE Sensex crossed the 31,000 mark in the second quarter of FY 2017-18. Of 39 AMCs, only four fund houses –DHFL Pramerica, IIFL, Sahara and Taurus – witnessed a decline in their quarterly AUM.

HDFC Mutual Fund continues to be the top player in equity AUM. The fund house manages a quarterly AUM of Rs.1.24 lakh crore in equity funds as on September 2017, shows the data collated from the AMCs website. Pure equity funds, balanced funds, ELSS and other ETFs have been included in equity funds. Of the total AUM of Rs.2.70 lakh crore, HDFC MF manages 46% of the assets in equity funds. Equity AUM of the fund house has increased by over 58% from Rs.78,511 crore in September 2016 to Rs.1.24 lakh crore in September 2017. The fund house manages Rs.79,413 crore in pure equity funds. ICICI Prudential Mutual Fund, which currently manages the largest AUM in the industry, stood at the second position with equity AUM of Rs.1.16 lakh crore. Its equity AUM increased by 56% from Rs. 74,551 crore in the quarter ended September 2016. SBI MF has overtaken Reliance MF to become the third largest fund house in terms of equity AUM. The total equity AUM of the fund house stood at Rs.93,891 crore in September 2017. Its equity AUM increased by 88% or Rs.44,051 crore  in the last one year making the fund house one of the fastest growing fund houses. The growth in its equity AUM is largely due to contribution from EPFO in ETFs. While the fund house manages Rs.40,052 crore or 43% of total equity AUM in pure equity funds, its AUM in ETFs is Rs.32,000 crore or 32% of total equity AUM. In terms of percentage, Kotak Mahindra Mutual Fund recorded highest growth in its equity AUM. The fund house witnessed a 102% growth in total equity AUM from Rs.18,255 crore to Rs.36,892 crore in the last one year. Its AUM in pure equity funds witnessed an increase of 94% to 29,830 crore in September 2017.  Overall, the total equity AUM of the top 10 fund houses stood at Rs.6.80 lakh crore as on September 2017. This shows that the top 10 fund houses account for nearly 80% of the total equity AUM in the industry. The total equity AUM of the industry stood at Rs.8.50 lakh crore in September 2017. 

Investors are taking advantage of the downfall in the equity markets to accumulate units of equity funds. Despite volatility, the mutual fund industry has witnessed impressive net inflows of Rs.29,045 in equity funds including pure equity funds, balanced, ELSS and equity ETFs in September 2017. However, equity funds had received the highest net inflows of Rs.30,658 crore in August 2017. The total equity AUM has increased by Rs.25,000 crore to reach a record high at Rs.8.49 lakh crore in September 2017. In the pure equity funds category, the industry has received Rs.18010 crore in September 2017. This can be attributed to increased participation of investors through equity funds as and when markets decline and inflows in arbitrage funds. Balanced funds followed pure equity funds. Investors have put Rs.8,141 crore in balanced funds in September 2017. The AUM of balanced funds has reached Rs.1.35 lakh crore. Most of the inflows in balanced funds are due to increasing participation of HNIs through balanced advantage funds.

The latest SEBI data shows that the Rs.21 lakh crore mutual fund industry has added 12 lakh new retail folios in September 2017. A rough calculation indicates that the industry has added an impressive 63,000 folios each day in the month of September. As a result, the total folio count has reached over 6.20 crore at the end of the second quarter of FY 2017-18. SEBI data shows that there has been a consistent surge in the number of folios in equity funds. Of the 12 lakh folios, the mutual fund industry has added over 8 lakh folios in pure equity funds. The category has received inflows of Rs.18010 crore in September 2017. Overall, the industry has added over 11.50 lakh retail folios in equity funds if we include pure equity, ELSS, balanced funds and ETFs that track indices. Balanced funds continued the positive momentum by adding 2.16 lakh folios. The category received net inflows of Rs. 8,141 crore in September 2017. Also, the AUM of balanced funds has reached Rs.1.35 lakh crore. Most of the inflows in balanced funds are due to increasing participation of HNIs through balanced advantage funds. Equity ETFs witnessed a marginal drop of 312 folios in September 2017. However, the category saw inflows of Rs.1,968 crore in September 2017 due to increased participation from EPFO. The Gold ETF category lost 5,564 investor folios and witnessed an outflow of Rs.74 crore. Debt funds added more than 67,000 folios last month. While income funds added nearly 43,100 folios, liquid funds added close to 23,500 folios. The category saw an addition of 633 folios last month. However, the debt funds category witnessed outflows of Rs. 50,350 crore mainly due to corporate redemptions.

Retail participation in mutual fund industry has been increasing though marginally. AMFI’s latest data shows that the retail investors account for 23% of the total industry AUM as on September 2017. In September 2016, retail AUM of the mutual fund industry was at 21% of overall industry AUM indicating an increase of 2% in retail participation. Retail AUM has increased by 41% in one year, shows AMFI data. The data shows that the retail AUM rose to Rs.4.69 lakh crore in September 2017 from Rs.3.31 lakh crore in September 2016. During the same period, the overall AUM has increased by 29%. The data also shows that retail participation in the equity funds has increased 44% in the last one year. It increased to Rs.3.80 lakh crore as on September 2017 from Rs.2.63 crore in September 2016. This increase can be attributed to the increasing appetite for equity funds and the growing popularity of SIP among retail investors. Rising retail AUM is a healthy sign for the industry as retail investors stay put for long term. If we compare the retail equity AUM to the overall equity AUM, it accounts for 45% of the overall equity AUM. The total equity AUM of the industry was at Rs.8.49 lakh crore in September 2017. Pure equity, ELSS, balanced funds, and equity ETFs have been included as equity funds. Among equity funds, pure equity funds witnessed the highest change in retail AUM.  The retail AUM of pure equity fund increased by Rs.71,154 crore from September 2016 to reach  Rs.2.69 lakh crore. However, in terms of percentage, balanced funds saw the highest change in the AUM. Retail AUM in balanced increased by 124% to Rs.46,433 crore in September 2017. The retail AUM in balanced funds stood at Rs.20,745 in the corresponding period last year. This can be attributed to the relatively smaller base of balanced funds. Moreover, many investors have started putting money in balanced funds as they have the potential to give more attractive returns than debt funds with the tax efficiency of equity funds. In addition, many distributors have been promoting balanced funds among first time investors to make them comfortable with mutual funds. Debt schemes are also catching the eye of retail investors. AUM under open-ended debt schemes except gilt funds stood at Rs.68,325 crore. It increased by over Rs.18,000 crore in the past one year. This constituted nearly 10% of the industry’s income funds. Investors are looking for other avenues after the reduction of interest rates of fixed deposits. Distributors typically suggest debt funds as an alternative for fixed deposits to investors with low risk appetite.

Of the total 1.59 crore SIP account in August 2017, more than 55% or 88.2 lakh SIP accounts have been active for over five years. These SIP accounts have assets of Rs.37,000 crore as on August 2017. SIP investors stay put for long term. AMFI data shows that almost six out of 10 SIP account are active for over 5 years. Of the total 1.59 crore SIP account in August 2017, 88.2 lakh SIP accounts have been active for over five years. Currently, the mutual fund industry has AUM of Rs.1.72 lakh crore through SIP.

To be continued…