For the first time in five years, the average assets under management (AAUM) of mutual funds have fallen. The AAUM of fund houses fell by 7 per cent or Rs 36,798 crore to Rs 4.93 lakh crore in the financial year 2008-09, as against Rs 5.30 lakh crore in 2007-08, according to data from the Association of Mutual Funds in India (Amfi).
In the last four years, the AAUM rose consistently. In 2007-2008, the AAUM increased by almost 50 per cent or Rs 1.75 lakh crore to Rs 3. 55 lakh, from the previous year. In earlier years as well, the AAUM rose from Rs 38,489 crore in March 2004 to Rs 3.55 lakh crore in March 2006.
Market experts attribute this substantial rise to the booming stock markets in those years. And a lot of investors were flocking to take advantage of it. Also, during that period a lot of innovative debt products came into being like fixed maturity plans (FMPs).
| THE FALL FACTOR | ||
| AAUM | Change in AAUM | |
| March 09 | 4,93,286.56 | -36,798.58 |
| March 08 | 5,30,085.14 | 1,75,070.37 |
| March 07 | 3,55,014.77 | 2,35,470.83 |
| March 06 | 1,19,543.94 | 60,859 |
| March 05 | 58,685 | 20,195 |
| Figures in Rs crore | ||
Dhawal Dalal, head (fixed Income), DSP Merryil Lynch said, “This year’s decline in equity market has resulted in significant redemption in equity funds. The tightness in the money market from July 2008 has also resulted in reduction in the corporate surplus.”
However, in the last one year, the stock market has fallen by 40 per cent.
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In the debt segment as well, products like FMPs, which had over Rs 1 lakh crore at one time, have suffered due to introduction of stringent guidelines by the Securities and Exchange Board of India and falling rates of interest. That is, FMPs now have to be listed in the stock exchanges.
Also, to reduce the asset-liability mismatch, the market regulator has asked fund houses to reduce their exposure in long-term securities in short-term liquid funds.
According to Laxmi Iyer, head (fixed income & product), Kotak Asset Management another reason for this fall in the AAUM is because of lesser new fund offerings in the market because of the choppy market conditions.