Gold ETFs witness massive growth

That markets and investors actively chase returns has once again been proved correct as seen from the fund flows across categories.

Equity-, balanced- and even tax-saving- categories have seen a decrease in assets under management to the tune of 16-18 per cent between November 2010 to November this year.

But in cases where the individual equity schemes had delivered a sound performance (falling less than their benchmark), the assets too grew.

It was a different case with gold altogether. Riding on the swift upward movement in gold prices, ETFs tracking this asset class alone saw a steep 176.2 per cent increase in assets under management.

The move to the perceived safe haven thus seems to have played out.

In a year where stock markets were having a rough ride and shed over 20 per cent, it is understandable that equity funds saw a decline in fortunes.

What is surprising is the fall in assets that the much favoured tax saving funds saw. The lack of clarity on tax exemption for these funds once the new tax code comes into force may have been one reason for investors holding back. Of course, the general underperformance of these funds vis-à-vis general diversified equity category too may have been an important reason.

Bucking the trend

Liquid and money market funds, thanks to good yields in a high interest rate regime, witnessed a strong increase in assets under management.

But it is not all gloom for equity funds. At least those that managed to contain downsides better than benchmark and a have long track record of delivering returns continued to witness inflows.

Among schemes that have disclosed AUM till November this year, Fidelity Equity IDFC Premier Equity and Fidelity, Franklin India Bluechip have witnessed 10-26 per cent increase in assets under management. Those with a smaller asset base but steady track record such as ING Dividend Yield, Tata Dividend Yield and Quantum long-term equity had 40-90 per cent increase in their AUM.

The asset increase despite the decline in net asset values demonstrates investor confidence leading to fresh inflows.

These funds' NAVs fell 5-7 percentage points less than the Nifty did, over this one year period. On the flip side, the worst performing funds had a decline of as much as 50-60 per cent in their assets.

Even within fund houses, the best performing funds saw increase in asset sizes, even as investors shunned the laggards. For example IDFC Classic Equity, Franklin India Smaller Companies or ING Contra witnessed 36-40 per cent decline in AUMs, in contrast to some of their other top performing funds mentioned earlier.

ven@thehindu.co.in

(This article was published on December 26, 2011)
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