Fund houses: Investors ditch small fries

Top 10 players manage to capture more market share

Polarisation of assets towards India's top-10 mutual fund houses is continuing unabated. The year is proving difficult for smaller players.

Preference among investors' community for larger fund houses is on the rise if statistics for the first half of the current financial year is anything to go by. Assets under management (AUM) of top players have remained more or less stable, while smaller and mid-sized fund houses are losing money big time.

At a time when the industry as a whole could see a mere decline of one per cent in its average AUM, several small players lost anywhere between 15 per cent and as high as 42 per cent of their assets. For instance, Taurus MF and Peerless MF witnessed an erosion of 42 per cent during April-September. While, Principal PNB MF and ING MF saw 23 per cent of asset erosion.

In contrast, the top 10 players collectively managed to gain 1.3 per cent in assets to Rs 6.36 lakh crore. With this, big fund houses captured two per cent more market share, taking it up to 78.7 per cent during this period.

Says C R Chandrasekar, co-founder and CEO of Wealth India Financial Services: “Majority of the money has been flowing to top ten players.”

The chief executive officers of the affected fund houses say it was a result of surprising monetary tightening by the Reserve Bank of India in July, amid weakening Indian currency that propelled institutional clients to withdraw their money from liquid and liquid plus schemes.

“This took a substantial toll on our assets during the July-September quarter. However, now within the last fortnight, most of the funds which flowed out have come back and soon situation should be back to normal,” says one of the CEOs, of a mid-sized player. According to them, in such a panic situation, investors sometimes tend to withdraw from smaller fund houses and pump money in the larger players. This ensured the assets of larger players did not decline, they add.

However, they are quick to admit that higher institutional money creates a problem in such a situation. "If we had larger retail money, situation could have been under control," adds a CEO.

The relatively better retail money, considered to be ‘sticky’ money, tend to help large money managers overcome such dire phases. For instance, HDFC MF, Reliance MF, UTI MF and SBI MF are focusing more on retail now.

As on September 30, the industry had an average AUM of Rs 8.08 lakh crore, against Rs 8.16 lakh crore in March 2013.