Retail investments in debt schemes are up from a year ago with increasing number of people turning to these fixed income funds. As many as 8.86 lakh retail investor accounts were opened in the year ended September 30, 2010, suggesting growing interest in debt among individual investors, writes Ravi Samalad.
Mumbai: Retail investors have shown rising appetite for debt mutual fund schemes over the past one year. The retail assets under management (AUM) in debt schemes of mutual funds has risen nearly 27 per cent to Rs 17,594 crore at the end of September 30, 2010 from Rs 13,866 crore a year earlier, according to AMFI data.
The number of folios of retail investors in debt schemes was up nearly 31 per cent to 37.6 lakh at the end of September 30, 2010 from 28.7 lakh folios a year ago. The retail investment in debt schemes is still low compared to the overall AUM in debt schemes, but the significance is in the increase in the number of folios.
Since March 2009, the AUM of retail investors in debt schemes has increased by Rs 9,677 crore and the number of investor accounts rose by 12, 69,000, according to AMFI data. Debt schemes do not include liquid or money market schemes and gilt funds.
The overall retail contribution in all debt schemes including liquid schemes and gilt schemes rose 108 per cent to Rs 18,654 crore at the end of September 2010 from Rs 8,976 crore at the end of March 2009. The number of folios has also seen a rise of 47 per cent to 39.96 lakh from 27.26 lakh during the same period.
Arvind Chari, Fund Manager (Fixed Income) at Quantum Mutual Fund, said the rise in retail investments in debt schemes is because retail investors are looking for alternatives to fixed deposits and mutual funds are the best alternative. “The returns on FDs are also low these days. MFs have traditionally chased corporate money in debt funds but that is slowly changing. But the overall share of retail investors in debt funds is quite low even today. Retail investors have no access to bond markets in India because of the big lot size,” he said.
One of the reasons cited by some industry players for the spurt in debt folios is that distributors are increasingly advising their clients to invest in fixed income schemes before transferring to equities through a systematic transfer plan (STP).
“A lot of distributors especially bankers are recommending STPs as an option to customers to enter into equity gradually,” said the sales head of a private mutual fund.
The total assets under management (AUM) in debt schemes, including all investor categories increased 45 per cent to Rs 4.24 lakh at the end of September 2010 from Rs 2.93 lakh crore at the end of March 2009. The number of folios has risen 44 per cent to 43.76 lakh during the period.
Debt funds invest in bonds issued by companies, banks and financial institutions and certificates of deposit of banks and commercial paper issued by companies.
