Equity funds lost close to 40 lakh folios last year

Folio consolidation and redemptions are the primary reason for drop in equity folios.

The mutual fund industry lost close to 40 lakh folios in equity funds in FY2013-14, shows the latest SEBI data. Fund officials attributed the decline to redemptions and folio consolidation.

As on FY21013-14, there were 2.91 crore equity fund folios, down from 3.31 crore the previous year.

“Some investors have consolidated their investments within the same fund house under a single folio. The drop in folios is also a factor of redemptions. The regulator is not allowing fund houses to launch similar looking schemes due to which lot of AMCs launched closed end funds. The net sales in existing schemes is negative,” said Nikhil Kothari of Etica Wealth Management.  

Investors pulled out Rs. 9,269 crore from equity funds last year as the markets continued the uptrend in 2014. Fund houses launched a slew of close end equity funds which managed to collect decent money from investors. The industry launched 19 closed end funds last year. The number of equity funds has gone up to 363 in FY13-14 from 347 the previous year. However, inflows in existing schemes continued to be low.

The pace of folio closures though slowed down in FY13-14. The industry lost close to 40 lakh equity folios in FY13-14 compared to 45 lakh decline in FY2012-13.

“Investments will start coming in equity when interest rates decline. Investors were expecting that interest rates will be cut in mid-2013 but it was delayed. A lot of money has moved to debt because yields have been attractive. In the second half of 2013 both equity and debt were doing well but investors were not ready to invest in equity. Investors are booking profit after the recent run-up in equity markets,” said M S Shabbir, Managing Director, Sensage Financial Services.

The industry’s average assets under management increased by 13% from 7.94 lakh crore to Rs. 8.96 lakh crore largely on account of inflows in debt funds. Investors poured in Rs. 63,339 crore in debt funds. This is reflected in the growth in debt folios which increased by over seven lakh from 61 lakh in FY12-13 to 68 lakh in FY13-14. Nikhil said that lot of investments has moved to FMPs which were highly attractive when the yields were hovering around 9.50 % to 10% during September 2013. A lot of FMPs were launched in March.

Gold ETF folios also declined by 66,556 as they delivered negative returns. Thus, Gold ETFs are losing sheen as people are preferring to invest in physical gold, adds Nikhil.

The industry’s total folio count dropped by 32 lakh from 4.28 crore in FY2012-13 to 3.95 crore in FY2013-14.

Folios