The mutual fund (MF) industry has had a surprisingly good 2015. Neither the uncertain equity market nor the slower-than-expected economic recovery made a dent in incremental inflows of MFs.
According to a recent Crisil Research report, in the December 2015 quarter, average assets under management (AAUM) grew 21% to Rs.13.39 trillion as compared to the same quarter last year. A look at the net inflows data by the Association of Mutual Funds of India confirms the positive trend. Aggregate net inflows across categories increased three-fold in 2015 to Rs.199.61 trillion (till November) from Rs.65.12 trillion in 2014.
Inflows weren’t restricted to pure equity funds, income and hybrid funds (balanced equity-oriented) were also big gainers.
“After the equity market rally in 2014, there was a need to be conservative this year. So hybrid and other equity-oriented MFs fit in well,” said Manish Gadhvi, zonal head, NJ India Invest Pvt. Ltd, an MF distribution firm.
Reasons for growth
As per the Crisil report of 41 fund houses that declared their AAUM, 23 logged growth. The top 10 fund houses have managed to their increase market share marginally from 79% to 80%. Smaller asset management companies (AMCs), too, are gaining ground. According to Valueresearchonline, in 2015, only two out of the top 10 fastest growing AMCs were large-sized, rest were small- and medium-sized asset managers. Smaller AMCs have the benefit of a low base when it comes to growth statistics. However, there is a shift in distribution approach. According to Chandaresh Nigam, chief executive officer, Axis Asset Management Co. Ltd, “Investments mostly chase returns. But increasingly, there is a realisation that tactical selling isn’t always sustainable.”
Smaller fund houses are relying more on differentiation.
“We stuck to a strategy of sharply positioning funds. Distribution fraternity has also been supportive in recognising specific investor needs; as a result low volatility products saw good inflows,” said Vikaas Sachdeva, chief executive officer, Edelweiss Asset Management Ltd.
Both Axis and Edelweiss AMCs are among the top 10 fastest growing fund houses in 2015.
The number of new folioss, too, saw a rise. According to data from Computer Age Management Services Pvt. Ltd (CAMS), there was a 50% increase in new folios, with an average run rate of 300,000 new folios a month. New folios with systematic investment plan (SIP) grew 63%. CAMS Data Bureau Services, which aggregates 92% of MF industry assets, points to a 40% growth in the SIP book over the previous year. New SIP registrations witnessed a 60% increase.
Along with distributors promoting SIPs, investments through direct plans and investor education has marginally aided growth SIPs.
Direct plans are also gaining favour. Crisil data shows that AAUM of direct plans rose 28% in 2015, increasing their share in overall AUM to 35% as of December 2015 from 33%.
Truth is that this year has been lucky for MF with gold and realty not doing well. However, steady inflows across a variety of funds irrespective of market conditions are a good sign. This trend in 2015 can spell a good beginning for 2016 as well.