Not just in equity funds, many retail investors have been increasingly investing in debt funds.
AMFI data shows that six out of ten debt folios are held by retail investors. In other words, retail investors account for 63.6% of the total debt fund folios as of March 2020.
The trend was similar among HNIs accounting for 34% of the folios held by them. Overall, individual investors which include both HNIs and retail investors account for 98% of the total debt folios in the MF industry.
Debt funds include all debt oriented schemes other than liquid funds and money market funds.
Experts attributed this to the increasing popularity of debt funds among retail investors. Sunil Subramaniam, MD and CEO, Sundaram Mutual Fund says that many distributors have been positioning debt schemes as alternatives to bank FDs and post office deposits. In fact, the industry has witnessed SIP inflows in debt funds over the last few years, he said.
Seconding his view, Mumbai MFD Sadashiv Phene says that many investors shift their equity corpus to debt schemes when they get close to their financial goals. In addition, many investors have started investing in debt schemes to get better post tax returns compared to bank deposits.
Meanwhile, a Mumbai distributor requesting anonymity attributed this to underperformance of equity funds. “Of late, many retail investors have shifted their investments from equity funds to debt funds due to heightened volatility and lackluster performance of equity funds despite rally in equity markets. In addition, many distributors have started using risk analysis software to onboard new clients. These softwares suggest allocation to debt funds even for aggressive investors.”
Meanwhile, retail investors continue to hold majority of folios in equity funds. AMFI data shows that retail investors account for 93% of the total equity folios as on March 2020.
Overall, the MF industry has witnessed 9% growth in new folio addition to reach 8.97 crore in FY 2019-20. Of the total 8.97 crore folios, retail investors account for 89.9% or 8.06 crore while HNIs contributed 9.2% or 82.9 lakh folios as on March 2020.
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