Corporates save the day for MFs

Huge corporate inflows into liquid schemes, which hold money in cash, daily debt and other short-term instruments, have helped mutual funds buck the overall sinking trend in the equity market to post a 7.3 per cent increase in their assets under management to Rs 2.76 lakh crore in May.

As many as 21 of the 29 fund houses were able to increase the total value of the assets they managed last month, despite the Sensex plunging by 13.5 per cent during the month.

The biggest beneficiary of the influx of short-term money was Prudential ICICI, assets of which jumped 17 per cent to Rs 32,150 crore in the month, taking it to the number one spot in terms of sheer asset size and displacing the UTI Asset Management Company from the top perch.

Though reeling from the erosion of prices of its equity assets, the increase of nearly Rs 4,900 crore to its liquid schemes helped Prudential ICICI post a net rise of Rs 4,650 crore in its total assets under management.

The second-largest beneficiary fund able to make most of the huge inflows of short-term money into its 'liquid' schemes was Reliance Mutual Fund.

It saw its liquid and 'liquidity' schemes bulge by nearly Rs 2,900 crore in May, helping the company post a net increase of Rs 1,500 crore in its assets under management.

At the end of May, assets of Reliance MF, at the third place after Prudential and UTI, stood at Rs 27,900 crore, up 6 per cent over April.

"Most of the money, which comes into such low-return, ultra-liquid schemes and can be withdrawn very easily, is corporate money," said Dhirendra Kumar, chief executive of mutual fund tracking firm Value Research India.

"With the stock markets on a downward spiral, most companies that held their cash reserves in equity are moving them to such schemes, which are easy to get in and out. Though returns are only slightly better than what a bank deposit would give you, such investments are more tax-efficient than the latter (bank savings)," he said.

However, the negative impact of the 10-20 per cent drop in various stock price indices on the asset sizes was felt by those asset management companies that do not attract parking of cash in liquid schemes.

UTI AMC, which was pushed to the second spot by the flood of short-term money, was barely able to prevent its asset size from shrinking, managing a razor-thin growth of 1.47 per cent during May.

Standard Chartered AMC led the pack of four big funds that saw their assets under management shrink in the month with a 8.7 per cent slump, followed closely by SBI Mutual Fund, which saw its total equity-debt portfolio contract by 5.8 per cent to Rs 13,670 crore.

The other two prominent funds to see shrinkage of assets were Birla Sun Life and Tata Mutual Fund.

"We have our focus strictly on retail investors," said A K Sridhar, chief investment officer of UTI AMC, on the low amount of corporate money coming into its liquid schemes, adding, "we have done a good job of protecting small investor's capital in a market, which has corrected by 15-18 per cent".