But equities schemes AUM decline on redemption

The mutual fund industry has begun the second quarter on a positive note with the assets under management (AUM) growing by about six per cent to Rs 7.3 lakh crore.

This is the first time that the AUM of the industry has gone above the Rs 7-lakh crore mark since last July when it was Rs 7.2 lakh crore.

While the industry AUM grew marginally by 0.3 per cent between July 2011 and July 2012, individual categories saw a sharp decline or steep increase.

Gold exchange-traded funds rose 69 per cent to Rs 10,398 crore in July 2012 from Rs 6,119 crore in July 2011. On the other hand, fund-of-funds investing overseas fell the most by 17 per cent to Rs 2,394 crore.

On the rise in AUM, analysts say there is nothing unusual as the first month of every quarter sees huge inflows to the debt funds.

The AUM under liquid funds saw a steep increase of 12 per cent in July due to their continuing popularity. “It is unlikely that at this point interest rates will see a decline. Therefore, these funds continue to interest investors,” said Dhirendra Kumar, CEO, Value Research.

Income fund category, which grew by three per cent, saw the second highest increase.

Equity funds have seen a decline of 0.8 per cent. The decline is also attributed to redemptions by investors and to the falling market value of the equity assets.

Industry officials continue to be disappointed by the lack of retail investor participation in the mutual fund industry. “Efforts by fund houses are falling flat as distributors are not interested in selling mutual fund products as there is no incentive. Most measures announced by the regulators are beneficial only to the larger fund houses and will not really help us,” said the head of a mid-sized foreign fund house.

Fund analysts say that the level of investor activity in gold exchange-traded funds has reduced.

One reason for this is that fund houses are favouring gold fund of funds over gold ETFs for the simplicity of these products and ease in buying them.

sneha.p@thehindu.co.in

(This article was published on August 14, 2012)
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