Assets collectively
managed by Indian mutual fund houses have breached the 6 lakh crore mark, in March 2012, and plunged to Rs 5,87,217 crore. This shrinkage in assets under management, or AUM, of over 8.5 per cent, from Rs 6,41,937 crore in September 2011, is not the only bad news plaguing the industry.
Data on total investor folios, which enumerates
distinct investors' population catered to by asset management companies, or AMCs, has also registered a 1.5 per cent decline between September last year and March 2012.
In absolute terms, investor folios registered a decline of 7.2 lakh over these six months, according to data released by the mutual fund industry body - Association of Mutual Funds in India, or AMFI.
And within investor categories, which include corporates, banks, financial institutions, foreign institutional investors, high net-worth investors and retail, the later showed shrinkage of 1.7 per cent owing to a fall in folio numbers by 7.6 lakh.
Blame bouts of volatility in markets, or
lack of innovation among the AMCs, the Indian asset management industry defies its international image - that of largely catering to retail investors.
The structural flaws that the industry has built over the years, continue to get showcased in the mix of investors and their investments. Corporate investors account for less than one per cent of the mutual fund investor population. And despite a 15.5 per cent fall in their AUM over six months, their share of total AUM stands at 43.1 per cent in March 2012, compared to 47.3 per cent in September 2011.
FULL COVERAGE: India's Best Mutual Funds 2012Again, high net-worth individuals accounted for 1.76 per cent of the investor population in March 2012, yet their share of AUM was 26.6 per cent, compared to 23.7 per cent in September 2011. But retail investors, who make up 97.3 per cent of the investor population, accounted for a mere 27.4 per cent of the industry's AUM in March 2012, compared to 23.6 per cent in September last year.
The silver lining however is the fact that out of the Rs 1,34,091 crore of retail
investment in equity mutual funds, Rs 82,577 crore, or 61.58 per cent, stayed invested for over 24 months.
High net-worth investors with Rs 42,588 crore invested in equity funds displayed patience as nearly 40 per cent of their investments stayed invested for over 24 months according to AMFI data for March 2012. In September 2011, only 35.35 per cent of their investment stayed for more than 24 months. Volatility propelled by uncertainty, both on the domestic and global front, is the key reason why these investors have not churned their investments frequently.
Having seen a sharp downturn in equity markets in 2011, and with the higher interest environment, retail investors were attracted by debt oriented funds, which include gilt and liquid schemes.
According to
Business Today - Value Research
study of 'India's Best Mutual Funds', released in early April, equity mutual funds delivered average 20 per cent negative returns over one year period when debt funds gave positive returns of nearly 8 per cent.
The 6.1 per cent and 13.8 per cent increase in folios of debt funds, over the last six and twelve months respectively, is a clear endorsement. In terms of AUM, retail accounted for 6.15 per cent of total debt AUM in March 2012, up from 4.8 per cent in September 2011 and 5 per cent in March 2011.
SPECIAL: Why HDFC MF is the best fund house Among other investor categories, domestic banks and financial institutions category witnessed a decline of 77 per cent in folios as of March 2012. Compared to 5,779 in September 2011, the folios for this category were reported at 2,727 in March 2012 - a sharp fall of 3,052 folios. In a report, CRISIL Research attributes this fall to Reserve Bank of India's recent circular restricting bank investment in mutual funds to 10 per cent of their net-worth with effect from January 2012.
Gold has been a key flavour of the season with 11 per cent and 61 per cent growth in folios in the segment over the last six and twelve months respectively. Gold prices have seen a surge over the year on the back of volatility in the equity markets and risk aversion globally, according to CRISIL Research.
The total number of folios for gold exchange traded funds surged from 3,19,679 to 4,75,314 over twelve months until March 2012. The share of retail folios was 4,59,996, or 96.78 per cent, in March 2012 compared to 2,86,415, or 89.59 per cent in March 2011.
Average quarterly AUM for fund houses registered a near 2.5 per cent decline from Rs 6,81,708 crore in December 2011 to Rs 6,64,792 crore.
HDFC Mutual Fund retained its number one position with 13.5 per cent market share and a 1.41 per cent quarterly growth in average AUM in March 2012.
Reliance Mutual fund, with 11.75 per cent market share, registered a 5.1 per cent quarterly decline in its average AUM in March 2012. Among the top 10 mutual fund houses by average AUM, Kotak Mutual Fund saw the largest quarterly decline of 13.45 per cent in its average AUM in March 2012.
Needless to say, the mutual fund industry faces challenge from bank deposits which account for over 47 per cent of the gross household saving and higher inflation over the past few quarters has impacted the investors' propensity to save.
The fall of 29 per cent in the industry AUM, between November 2009, when industry had a record Rs 8,21,659 crore under its fold, and now clearly depicts the mutual fund industry's downhill journey.
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