Redemptions in liquid funds pull down industry AUM by 6 percent

The industry’s AUM fell from Rs 8.11 lakh crore in June 2013 to Rs 7.60 lakh crore in July 2013 due to redemptions from liquid funds by banks.

The mutual fund industry’s assets under management fell by 6% from Rs 8.11 lakh crore in June to Rs 7.60 lakh crore in July due to massive redemptions to the tune of Rs 45,296 crore from liquid funds. Industry officials said that many banks pulled out their investments from liquid funds after the announcements by RBI, which severely impacted debt funds. In total, the industry saw net outflows of Rs 50,067 crore in July compared to net outflow Rs 48,403 crore in June.

“The net outflow from liquid funds was primarily due to the negative returns in debt funds. It will take some time for the industry to adjust,” said Debasish Mallick, Managing Director & Chief Executive Officer, IDBI Mutual Fund.

Except gilt and fund of funds investing overseas, all other categories saw net outflows. The net inflows in gilt funds and fund of funds investing overseas stood at Rs 96 crore and Rs 29 crore respectively.

Reversing the trend of continuous net outflows from June 2012 to April 2013, overseas fund of funds received net inflows in the last two months i.e. June and July. The depreciating rupee has brought US funds in the spotlight. According to Value Research data, funds like DSP BlackRock US Flexible Equity Fund, FT India Feeder Franklin US Opportunities Fund, ICICI Prudential US Bluechip Equity have delivered an average of 33% absolute return YTD.

As for NFOs, only income funds were launched in July 2013 which managed to garner Rs 8,912 crore. Morgan Stanley Ultra Short Term Fund mopped up Rs 68 crore.

Equity funds too saw net outflows of Rs 1,652 crore in the month of July, after receiving net inflow of Rs 937 crore in June. Gold ETFs also recorded net outflow of Rs 107 crore. The government has taken steps to curb the gold imports in order to bridge the fiscal deficit. In fact, Reliance Mutual Fund has recently announced that it has stopped accepting fresh investments in gold.