Despite decline in key market indices, the average assets under management (AAUM) of the mutual fund industry touched an all-time high of Rs.21 lakh crore in August 2017. AMFI’s latest data shows that AAUM of the MF industry has reached Rs.20.97 lakh crore in August 2017.
The AAUM of the industry increased nearly a trillion in just two months. The average AUM of the MF industry has increased from Rs.19.92 lakh crore in June 2017.
However, the monthly AUM of industry stood at Rs.20.59 lakh crore in August 2017.
While AAUM is the average assets of the entire month, which is calculated by factoring in all working days of the month, month end AUM is the assets of the industry as of the last working day of the month.
Experts say that the growth has come largely because of higher inflows in arbitrage funds and equity funds through SIPs.
AMFI data shows that the industry has received net inflows of Rs.61,700 crore across all categories. The good news is that the industry has mopped up Rs.31,000 crore in equity funds including ELSS, ETFs that tracks indices and balanced funds.
AMFI said, “The AUM in the retail schemes (i.e. equity + ELSS + balanced schemes) increased by 3% from Rs.750,699 crore as on July 31, 2017 to Rs.772,246 crore as on August 31, 2017 and registered an increase of 48% YOY. Retail AUM constitutes about 37.5% of the overall Industry AUM, and including debt funds, the overall retail participation in mutual funds was little over 50% of the overall Industry AUM.”
Swarup Mohanty, CEO, Mirae Asset Mutual Fund attribute this growth to increase in inflows in equity funds. “Equity funds have been witnessing strong net inflows through SIPs in large cap, multi cap funds and balanced funds. Moreover, ELSS category is no longer a January to March phenomenon. Investors are becoming financially mature and hence they do not postpone their tax-saving plans until the last moment. In fact, many investors have started SIPs in ELSS,” says Mohanty.
Radhika Gupta, CEO, Edelweiss Mutual Fund says that sustained inflows through both - SIP and lumpsum have been driving the industry AUM. “Post-demonetisation, many investors have shifted their money from physical assets to financial assets. In addition, many investors have been investing their money in balanced advantage and asset allocation funds to ride the market volatility,” says Radhika.
Another reason behind increasing AUM is growing appetite for balanced funds among investors. AMFI data shows that balanced funds have received net inflows of Rs.8,783 crore.
Jinesh Gopani, Head of Equities, Axis Mutual Fund feels that investors having expectation of getting 8 to 10% have been increasingly investing in balanced funds due to unattractive interest rates. Gopani said, “Earlier, FDs delivered returns of 8-10%. However, banks have reduced their interest rates. Now these investors are looking at other avenues such as mutual funds.”
Improving domestic fundamentals have added to the confidence of investors in equity funds, says V Balasubramanian, CIO, IDBI Mutual Fund. He adds, “Investors have confidence that the market will go up due to improving macro economic conditions and recovery in earnings growth.”
Another positive trend for the industry is increasing contribution in mutual funds through SIP.
The latest AMFI data shows that the mutual fund industry received a monthly inflow of Rs.5,206 crore through SIPs. The monthly SIP inflows increased by Rs.1,709 crore from Rs.3,497 crore in August 2016, a growth of 48%.
Many financial advisors recommend SIPs to their clients as investors can invest in a disciplined manner without about market volatility and timing.