Mutual funds see assets dwindle

Plummeting stock prices and higher redemption demand from institutional investors saw mutual funds losing their assets under management (AUM) by 10-11 per cent on an average last month.

There were, however, exceptions such as Canara Robeco, Benchmark, DBS Chola, ABN Amro and JPMorgan which saw an erosion of 42.15 per cent, 33 per cent, 25.05 per cent, 14.6 per cent and 14.44 per cent, respectively.

Better performers include Principal Mutual Fund, Tata Mutual Fund and Reliance Mutual Fund which saw depletion in AUM by 1.42 per cent, 2.60 per cent and 2.77 per cent, respectively. UTI Mutual Fund lost 6.64 per cent, AIG Global, 7.92, Sundaram BNP Paribas, 8.25 per cent and ICICI Prudential 8.36 per cent.

In March, the market capitalisation of all the stocks listed on the Bombay Stock Exchange got eroded by Rs 7.42 lakh crore, or 12.60 per cent.

Companies trading on the National Stock Exchange, witnessed a depletion of Rs 5.62 lakh crore, or 10.36 per cent.

The erosion in AUM of mutual funds accompanied by the decrease in market capitalisation of stocks, however, doesn’t reveal the true picture.

This is because equity-oriented schemes, including ELSS, of mutual funds comprise only 35 per cent of the total asset under management. The rest is made up of debt-oriented and money market plans.

The AUM of growth plans of equity-linked schemes fell by more than 20 per cent on an average in March.

The AUM of equity schemes stood at Rs 2.08 lakh crore in February, 2.6 per cent lower than in January.

However, on adjusting net inflows, the fall was steeper at 5.8 per cent, which is more than the decline in market capitalisation of 2.8 per cent.

The steep fall in AUM of growth plans was partially offset by the increase in inflows of income schemes.

Mutual funds that have a large portfolio of income and money market schemes suffered less than the others.

A scheme-wise analysis also revealed that many investors who opted for growth options under equity schemes switched on a mass scale to dividend options.

The AUM under dividend plans of equity schemes increased for almost all the mutual funds.

Besides market volatility, fund managers were also subject to heavy redemption pressure, particularly from high-ticket investors. Following this, fund managers had to resort to distress selling to keep a higher percentage of cash (8 to 10 per cent) to meet redemption requests.