MF trends: Sectoral most in demand, hybrid funds' AUM touches Rs 10 trillion

The total Assets Under Management (AUM) of the mutual fund industry surged to Rs 67,09,259 crore in September 2024, reflecting a growth of 0.58% from August and a remarkable 25.64 per cent increase since March 2024, showed an analysis by Axis Mutual Fund.  This growth continues the industry’s upward trajectory, with a Compound Annual Growth Rate (CAGR) of 24.19 per cent since March 2021.

Asset Class Performance

Breaking down the AUM by asset class for September, equity funds experienced the most substantial monthly growth at 3.37 per cent, followed by hybrid funds with a growth of 1.64 per cent. Conversely, the debt category saw a decline of 1.33 per cent while both Exchange-Traded Funds (ETFs) and passive funds posted a growth of 2.21 per centr. Cash assets, however, plummeted by 14.87%, indicating a significant pullback in liquidity investments.

In terms of overall AUM contribution across categories, equity funds dominated with a 46% share, followed by debt funds at 33%, hybrid funds at 12%, ETFs at 9%, and passive funds at 1%.

Year-on-Year Growth

The equity category showed exceptional year-on-year performance, with a staggering growth of 62.93% compared to September 2023. The equity AUM stood at Rs 31,15,260 crore, with net sales reaching ₹34,393 crore for the month. Notably, the net sales to AUM ratio improved to 1.10%, up from 0.72% a year ago.

Sectoral and thematic funds were particularly noteworthy, contributing 38.54% of total equity net sales, driven by gross sales of Rs 21,917 crore, including Rs 7,842 crore from new fund offers (NFOs).

Sectoral/thematic funds garnered gross sales of Rs 21,917 Cr. for September 2024, of which Rs 7,842 Cr. came from NFOs

Source: Axis MF, all figures in Rs crore

Hybrid and Passive Fund Insights

The hybrid category is edging closer to a Rs 10 lakh crore AUM milestone, with September recording net sales of Rs 5,134 crore and a CAGR of 30.35% since March 2021. The multi-asset allocation fund was a standout in this category, achieving net sales of Rs 4,070 crore.

The top five categories accounted for an impressive Rs 687,508 crore, representing 74.02% of the total hybrid AUM. The hybrid segment achieved total gross sales of ₹37,147 crore, with redemptions amounting to Rs 32,013 crore. This resulted in net sales of ₹5,134 crore, reflecting a growth rate of 0.55% in the segment.

Despite market volatility, hybrid funds continue to attract investors looking for balanced risk and return profiles. The strategic allocation across various asset classes seems to resonate well with investor sentiments, especially in uncertain market conditions.

Passive investments have also been gaining momentum, with a total AUM of Rs 2,95,558 crore, reflecting a 41.54% increase since September 2023. ETFs saw their AUM grow by 45.43% over the same period, despite a sharp decline in net sales in September to ₹1,614 crore, down 86.21% from the previous month.

Debt Market Challenges

The debt segment, while witnessing a year-on-year growth of 16.49%, faced challenges in September 2024 with net sales standing at -Rs 21,866 crore. Gross redemptions exceeded gross sales, highlighting investor caution amid fluctuating interest rates.

Retail and HNI Investor Trends

Retail investors have continued to dominate the equity and hybrid asset classes, with a 32.37% CAGR since March 2021. Meanwhile, the high net worth individual (HNI) segment also showed robust growth at 25.74% CAGR over the same period.

September 2024 also witnessed new fund offerings (NFOs) mobilizing over Rs 14,575 crore across 27 newly launched schemes, according to data from the Association of Mutual Funds in India (AMFI).

Breakdown of Fund Mobilization

1. Income/Debt Oriented Schemes:

A single Medium to Long Duration Fund was launched, attracting Rs 72 crore.

2. Growth/Equity Oriented Schemes:

Seven schemes in this category saw significant interest, with Sectoral/Thematic Funds leading the charge, collectively raising Rs 7,842 crore. Other notable contributions included:

Multi Cap Fund: Rs 297 crore

Large & Mid Cap Fund: Rs 728 crore

Dividend Yield Fund: Rs 1,006 crore

Overall, the Growth/Equity Oriented Schemes mobilized a total of Rs 9,873 crore.

3. Hybrid Schemes:

Two hybrid schemes, including a Multi Asset Allocation Fund and an Arbitrage Fund, contributed ₹872 crore to the total.

4. Other Schemes:

In the passive investment space, 13 Index Funds raised Rs 3,656 crore, while 4 Other ETFs garnered Rs 102 crore, bringing the total for this category to Rs 3,758 crore.

Industry Insights

The continued interest in Sectoral/Thematic Funds underscores a growing trend among investors seeking targeted exposure to specific sectors. With a total of 27 schemes launched, the diversified offerings cater to various investor preferences.