Mutual fund industry lost 52 lakh retail folios from equity funds last year

Retail investors cashed out of equity funds last year while HNIs and banks increased their exposure to equity funds.

The latest data published by AMFI shows that the mutual fund industry lost more than 50 lakh retail folios across all categories.

The maximum number of folio erosion was in equity funds (-52.80 lakh), followed by balanced funds (-2.95 lakh), and Gold ETFs (-63,065).

While the decline in retail folios could also be due to folio consolidation and fresh investment in existing folios, a large part of the decline in folios is attributed to redemptions. According to SEBI data, equity funds have seen net outflows of Rs. 9,268 crore last year.

Out of the Rs. 1.72 lakh crore total assets in equity funds as on March 2014, retail investors hold 69% or Rs. 1.18 lakh crore.

While retail investors cashed out of equity funds in hordes, HNIs, banks and corporates increased their exposure in equity funds. HNI folios in equity funds increased by 12.91 lakh last year while folios of banks increased by 694.  

 (HNIs are those who invest Rs. 5 lakhs and above)

Retail and HNIs take a shine to liquid funds

Retail investors are taking a shine to liquid funds. Their folio count increased by 36,261 while their assets in liquid funds went up from Rs. 1,267 crore in March 2013 to Rs. 2,119 crore in March 2014.

Similarly, HNI folios in liquid funds increased by 42,594 and their investments increased by 135% from Rs. 5,752 crore in March 2013 to Rs. 13,492 crore in March 2014.

Corporates continue to be the largest investors in liquid funds (Rs. 1.08 lakh crore), followed by HNIs (Rs. 13,492 crore) and banks.

Retail investors and HNIs increased their exposure to debt funds as well. Retail and HNI folios in debt funds increased by 4.70 lakh and 2.86 lakh respectively. Nikhil Kothari of Etica Wealth Management said that higher yields in FMPs had attracted a lot of retail and HNI investors. “FMPs were offering 10-11% return during June last year which attracted a lot of HNIs as well as retail investors. FMPs score over fixed deposits and are also tax efficient.”

 Retail investors turning passive?

While retail investors continued to exit from actively managed funds to cash in on the rise in equity markets, ETFs saw an increase in retail folio counts. The number of retail and HNI folios in ETFs increased by 50,180 last year.  There are 28 ETFs (other than Gold ETFs) in the market which manage assets of Rs. 4,127 crore.

Fund of funds become popular among retail

Thanks to new fund launches and uptick in the US markets, retail folios in the fund-of-funds category increased by 4,058 while HNI folios grew by 5,066 last year.

Fund houses launched a slew of US focused funds while JP Morgan and Deutsche launched their Europe funds. The Indian currency’s depreciation coupled with uptick in US markets helped US based funds deliver superior returns. The S&P 500 Index was up 17% from June 2013 till May 2014. According to Value Research, the international fund of funds category have delivered 13% return over a one-year period. 

Gold ETFs lose sheen

Decline in gold prices made investors move out of gold funds. All four categories of investors (corporate, Banks, FIIs, and retail investors) exited from Gold ETFs. The total folio count of Gold ETFs dropped by 63,065.

Overall, the industry lost 32.79 lakh folios. The total folio count of the industry dropped from 4.28 crore in March 2013 to 3.95 crore in March 2014.

Retail folios