The Hindu Business Line : Mutual funds not keen to disclose average AUMs

LARGE mutual funds are not complying with the recommendation to disclose `average' assets under management. Under the current regulation, asset management companies (AMCs) are required to file assets under management (AUM) at the end of each month.

The Association of Mutual Funds in India (AMFI) has recommended that all fund houses declare average assets under management for the month rather than the figure on the last day of the month.

"The performance of mutual fund houses in India is evaluated on the basis of total assets managed by them and there has been a tendency to pump up the AUM by accepting large inflows towards the end of the month. To counter this, AMFI has advised AMCs to disclose average AUMs every month," said Mr A.P. Kurien, Chairman, AMFI.

However, only a handful of AMCs are complying with this recommendation.

Prudential ICICI Mutual Fund, currently the largest private sector AMC, does not see a requirement for filing average AUM. "How does it make a difference to the customer whether what is quoted is average AUM or end of the month AUM? The Rs 16,000 crore that we manage would not go down to a figure of Rs 5,000 crore, it would be in the vicinity of the quoted figure. So at our level it does not make a difference whether we quote average AUM or not," said Mr Pankaj Razdan, Deputy CEO, Prudential ICICI MF.

Competitors disagree. "The peculiarity of the Indian mutual fund industry is that there is a lot of institutional money being invested. This tends to be highly volatile. An average AUM records the growth of the fund more accurately than the end of the month AUM. It is important for the customer to have this information and we make it available," counters Mr Sandeep Dasgupta, Chief Executive Officer, Deutsche Asset Management.

Industry insiders confide that AMFI's recommendation has not been made into a guideline because of some large players who consistently ingest money into funds at the end of the month, to hold on to their position. "Unfortunately the mutual fund industry in India has been reduced to a chase for AUMs and if this becomes a regulation, the large funds would have no place to hide," says the Chief Executive Officer of an AMC who did not wish to be named.

Mid level players see the reporting of average AUMs as a best practice. "We would start posting average AUMs soon. We are getting our systems geared to do so, our average AUMS look very healthy," said Mr Prakash Dalal, Chief Marketing Officer, Kotak Mahindra MF. The MFs that currently comply with the recommendation all quote average AUMs that are better, if not equal to month end AUMs.

Monthly full portfolio disclosures, as against quarterly, became a norm after some players started publishing it. "If the market starts demanding average AUMs, the publication of this would also become standard practice," said Mr Dasgupta.

Mr Razdan is unconvinced. "There are larger issues than average AUMs that should be discussed first. We would not be reporting it unless it is made mandatory," he said.