Mutual funds check investor exodus

Mutual funds check investor exodus

New Delhi: After losing investors for three consecutive months in a large-scale exodus, mutual funds seem to be gaining investors’ confidence again, as they managed to get over 21,000 new accounts in June.

However, new investors seem to be coming in for debt schemes only and fund houses continued to lose investors in equity schemes for the fourth consecutive month in June 2010.

According to data available with industry body Association of Mutual Funds in India or Amfi, the total number of investor folios with a total 38 fund houses in the country increased to 47.94 trillions at the end of June 2010, against 47.91 trillions a month ago.

However, the cumulative increase of 21,350 folios, or investor accounts, seems to be entirely on account of new investors in debt schemes, with 1.90 lakh new folios added.

At the same time, the folios for equity-focused mutual fund schemes dipped by more than 1.37 lakh during the month.

This takes the total investor exodus from equity schemes to close to 750,000 in the past four months -- that is, from March till June 2010.

The fund houses have been working hard to regain investors and have been asking market regulator Sebi for remedial action, including an expanded distribution model for these investment products.

Debt schemes had seen an increase in the number of investor accounts last month also, but such schemes account for under 10% of the total number of MF accounts.

As per the Amfi, the total number of equity-focused scheme folios stood at over 4.05 crore at the end of June 2010, while the figure for debt schemes was little over four lakh.

The total number of folios had reached as high as 4.83 crore, including 4.13 crore accounts in equity-focused schemes, at the end of February 2010.

Since then, the number of accounts in equity schemes have declined by about 750,000, although non-equity schemes have registered an increase of close to 400,000 folios.

The fund houses are getting increasingly concerned about investor exits, particularly in the backdrop of market regulator Sebi scrapping the entry-load for MF schemes.

While this step was taken late last year in the investors’ interest, the distributors have become less interested in selling equity MF schemes since then, while products like ULIPs, which are life insurance products but invest heavily in stock and bond markets just like MFs, are being sold aggressively because of high commission payouts.

Concerns over investors’ flight away from MFs have been compounded by the fact that the stock market has been gaining in the past four months and the number of demat accounts, which are needed for investing in the stock market, has also grown during this period.