The Hindu Business Line : MFs asset base shrinking

ASSETS under management of the Indian mutual funds have been eroding month by month for the last quarter. Currently, 29 fund houses manage a little over Rs 1,53,000 crore. This pegs the industry loss at over Rs 2,000 crore every month for the quarter ending September 2004.

Among the bigger fund houses, only Franklin Templeton has managed to buck this negative trend and has added to its corpus, but Prudential ICICI, HDFC Mutual Fund, Birla Sun Life Asset Management Company among others, have seen reduction in the assets under management (AUM).

Prudential ICICI has shed over Rs 800 crore between September and July, HDFC Mutual Fund's AUM shrank by Rs 826 crore and that of UTI decreased by Rs 1,414 crore.

Public sector fund houses such as UTI Mutual Fund and LIC Mutual Fund have also posted negative growth in AUMs.

Fund houses attribute this slump primarily to the `September Effect.' Corporates and institutional investors usually redeem their mutual fund investments ahead of reporting their half-yearly results. 0While the September effect does have a role to play, distributors insist that the poor performance, especially of debt funds is the reason that investors are staying away.

"The corporate money that was lost during the last couple of months, should be coming back to the funds in the near future," said Mr Krishna Kumar, Head of Marketing and Sales, Kotak Mahindra Asset Management Company.

Mr Ashuthosh Bishnoi, Chief Marketing Officer, UTI Mutua Fund, said that there is a concern among retail investors as many debt funds have been posting decreasing net asset values. "Our strategy is to address the market with more equity products," he said.

Distributors said that they are reluctant to pitch debt products to their customers now as there is no clarity about interest rates. "We would rather wait and watch and be sure about the interest rate outlook before we start pushing debt funds. Irrespective of what the fund houses claim, when the funds do not perform well, we have to bear the brunt of investors' ire," said a Mumbai-based retail distributor.

While urban India is taking a cautious breather from mutual fund investments, non-metros and mini-towns are beginning to jump on board this investment bandwagon. "There is money flowing in now from places like Coimbatore, Solapur etc. There is a greater level of product awareness in these areas," said Mr. Krishna Kumar.

This is also credited to Association of Mutual Funds in India's geographical expansion of its certification programme.