Quarterly AUM can still camouflage real status

Mutual fund officials say the move to disclose AUM every quarter instead of every month might end the race for AUM rankings. But they also point to the fact that it would still not present the correct picture of a fund house, says Ravi Samalad.

Mumbai: The Association of Mutual Funds in India (AMFI) has sought to curb unhealthy competition among some mutual fund houses for reporting bloated assets under management (AUM) at the end of every month. The industry body has decided that all mutual funds from October 2010 onwards disclose average AUM figures after every calendar quarter.

"The average AUM for each quarter (90 days average) will be computed and uploaded on AMFI Website on the first working day of the following month of every quarter, effective from the quarter ending December 31, 2010," AMFI said in a circular sent to mutual fund houses.

AMFI decided on announcement of average AUMs every quarter after some asset management companies took up the issue at the industry body meetings. The asset management companies were responding to what they called extensive media glare on AUM figures and the resultant unnecessary pressure on funds.

Industry officials, who did not want to be quoted, said mutual fund houses were known to shoring up their assets base at the end of each month to report a higher AUM.

 “In a way, this is good. Quarterly AUM numbers make sense rather than on a monthly basis. I am not too sure whether this can give a better picture of a fund house but at least there is data if you need one,” says T P Raman, MD, Sundaram Mutual Fund.

It was easier for a fund house to report bloated average AUM every month. Sustaining the effort for showing higher average AUM over a three-month period was not possible, the CEO of a large mutual fund house said. “The efforts required to show a higher average AUM over three months would be a deterrent.”

One factor that will affect the AUM numbers each quarter will be the large scale redemptions by companies around the 15^th of the last month of every quarter to pay advance taxes to the government.