Global crisis pushes MFs in a tight spot

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Mumbai, Oct 5: The current global crisis and the state of the equity markets has the domestic mutual funds in a tight spot. The asset under management has dipped by 2.30% over the month in September and also over the last six months and the beginning of the year. And there are hardly any equity new fund offers (NFOs) available in the market today. The month of September saw three NFOs hit the market and collect around Rs 1,300 crore.

Since the beginning of the year, the average AUM number has shrunk by 7.47% to touch Rs 5.29 lakh crore from Rs 5.71 lakh crore in January this year. And while most of the large mutual funds have maintained their market share, many of them have seen a reduction in their AUM numbers. Over the past six months, from the end of March till the end of September, ICICI Prudential has lost its place as the second largest asset management house to HDFC Mutual Fund. That is, if one looks at the average AUM numbers. Even Reliance Mutual Fund, the largest in the business, has seen a 4.89% dip in the average AUM number in the first half. The surprising element here is that Canara Robeco,, a joint venture between Canara Mutual Fund and Rabobank, has more than doubled its AUM and market share in the past six months. It now has around Rs 6,006 crore under management.

“Obviously the falling equity markets and also the volatility in the money markets, especially in June and July have added to the erosion. Also the number of NFOs have shrunk drastically. So this was expected,” says a fund manager with a leading overseas fund in India.

“As the markets have dipped, the inflow into funds also has and one can expect a minor outflow as well,” said Anup Bagchi, executive director of ICICI Securities, before the numbers were released. He reckons that with fixed maturity plans offering 11.5% returns and the markets at 12,500 levels, most of the investors are well hedged. So from these levels, FMP will offer better returns unless the market crosses the 14,500 level mark. But even in the case of FMPs, the number of NFOs have remained flat in September where around 50 odd offers were made and there were around 58 made in August this year.

However, most fund managers reckon that there is no need to panic as they do not expect huge redemption pressure. “Overall, expect for specialised technology funds most of the equity funds have operated in line with the benchmark indices in the past six months and many have actually fallen lesser than these indices,” the fund manager adds. And, equity based arbitrage funds have taken an advantage of the volatilty and recorded a positive return of 3.28% in the first six months.

At the moment, gold exchange traded funds are at the top of the returns heap with a six monthly return of around 9.29% , and rest of the debt based funds are in the positive zone.