Share of individual assets dips in MFs as investors eye traditional mode

The mutual fund (MF) industry is seeing a dip in the share of individual investor assets, with market volatility and overall economic uncertainty taking a toll on investor sentiment.  

As on May 31, 2020, the share of individual investor assets in the industry stood at 52 per cent, which is 400 basis points (bps) lower than the levels seen at the end of the previous calendar year.

While correction in equity markets has contributed to the erosion of individual asset base (as these typically invest in equity schemes), slowdown in investor flows and redemptions has also weighed onto the asset base.

Industry participants say apart from market volatility, concern over incomes is a bigger worry for investors. “Salaried investors are worried about their income, and want to keep cash handy, as well as protect it through lesser-volatile alternatives,” said Ritesh Sheth, co-founder of Mumbai-based Tejas Consultancy.  

On Friday, the Sensex lost as much as 1,190.37 points, or 3.54 per cent, in intra-day trade spooked by fears of rising Covid-19 cases in the US, before staging a recovery to close 0.7 per cent higher.

 

 

Experts say the lower share of individual investor base is not a good sign for the Rs 24-trillion MF industry, as these assets tend to be more sticky in nature.

“Institutional assets can move in and out with higher velocity and typically take 

exposure to debt-oriented schemes, which have lower fee-earning potential. 

Meanwhile, individual investors tend to take exposure in equity schemes that offer better yields to asset management companies,” said a fund manager.

In May, equity flows in the industry dipped by another 15 per cent to Rs 5,256 crore. The contribution through systematic investment plans, or SIPs, also declined for the second month in a row.

Experts say investors are shifting to traditional mode of investments.

“Consolidation in markets in May after a strong recovery gave opportunity for investors to exit. Several investors that came in recently have never been exposed to such kind of a downturn. They are now looking at conserving capital through traditional investments such as gold, bank fixed deposits, and then chase higher returns,” said Srikanth Matrubai, chief executive officer of SriKavi Wealth.

At the end of May, the SIP book for the industry stood at Rs 8,123.03 crore, six per cent lower in two months after touching a peak of Rs 8,641 crore in March.
 

The number of SIP closures in May stood at 652,000, which was 20 per cent higher than previous month. 

SIPs are typically used by individual and retail investors to deploy their investments in a staggered manner in the markets.