The Hindu Business Line : Mutual funds assets under management rise marginally

ASSETS under management of the mutual fund industry have increased by a marginal sum of Rs 2,046 crore in January. This is despite the fact that several fund houses had raised money on new schemes through the initial public offerings in December.

According to mutual fund distributors, asset management companies (AMCs) are tapping the same set of investors leading to very little "new money" flowing into schemes. As distributors and financial advisors are compensated very highly for promoting and selling the latest IPOs of fund houses, they tend to make their margins by asking customers to switch from one fund to another. The complexity of products that are being launched now also makes it difficult for retail investors to ascertain whether the product is appropriate for their investment needs or not.

The mutual fund industry has been plagued by lack of substantial growth of assets under management throughout financial year 2004-05.

AUMs have actually decreased by over Rs 2,000 crore since April 2004. Of this, though the total sales of equity funds have increased to Rs 4,623 crore in December as compared to Rs 2,245 crore in April 2004, the total assets under management of the industry are still very heavily skewed away from equity funds.

Incidentally, with the returns posted by debt funds shrinking, total sales of income funds have fallen to Rs 14,172 crore in December 2004 from Rs 16,957 crore at the beginning of the financial year.

While they concede that there is a renewed interest in equity funds as the stock markets have been on a northward move, distributors say that it is not in line with expectations. The growth of equity funds for the industry is much lower than expected as the same few investors withdraw from schemes and invest in new ones, said a retail financial advisor.

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