Some debt funds are managing AUM as small as Rs. 4 lakh.
Fund houses are likely to merge or wind up their debt schemes which are managing very small AUM in order to comply with a SEBI diktat which requires them to maintain a minimum of Rs. 20 crore assets during their lifetime.
According to Value Research, there are 74 schemes which have AUM of below Rs. 20 crore. In the gilt category, some funds are managing assets as small as Rs. 4 lakh.
“Some funds go out of favour. It also depends on the general size of the AMC. These schemes can be either merged or shut. It is a good move by SEBI. AMCs will now focus on streamlining their products. If there are two schemes having similar features/objective only one scheme gets majority of inflows,” said the fixed income head of a foreign fund house.
Fund managers say that investors typically invest in gilt funds in anticipation of a rate cut. Since there have been no rate cuts, investors have moved out of gilt funds which has resulted in drastic fall in AUM in certain schemes. AMCs have not wound up these schemes because they would find it difficult to get SEBI approval to launch similar schemes in the future.
Due to lack of appetite, fund officials said that it would be difficult for schemes which have very small AUM to raise fresh money from investors. Such schemes, they say will either have to be merged with other schemes.
“It is good if there is some consolidation in the industry. We receive withdrawals in long duration funds if the markets are volatile. Some of our schemes were managing below Rs. 20 crore AUM but we have managed to increase their size. AMCs will have to find a viable option to comply with SEBI rule. They can either raise the AUM or merge with some other scheme,” said the CEO of a foreign fund house.
In 2011, SEBI had ordered fund houses to raise at least Rs. 10 crore in equity funds and Rs. 20 crore in debt funds in order to stop casual fund launches. Out of the Rs. 10 lakh crore total assets managed by the industry, 75% assets or Rs. 7.56 lakh crore AUM consist of debt funds.
SEBI has given one year’s time for AMCs to raise their AUM in debt schemes to Rs. 20 crore.
|
Scheme |
AUM (Rs. cr) |
|
ING Gilt Fund - Provident Fund - Dynamic Plan - Cyclical 2014 |
0.04 |
|
ICICI Prudential Advisor Series - Very Cautious Plan |
0.82 |
|
Sundaram Income Plus |
2 |
|
Canara Robeco Gilt Advantage Fund |
1 |
|
Edelweiss Liquid Fund |
11 |
|
Sahara Classic Fund |
0.19 |
|
Source : Value Research |
|
