Debt schemes take a knock

Mutual funds' overall assets erode 3.8% to Rs 18,506 crore in August.

Debt- and gilt-focused schemes have led the decline in assets under management (AUMs) for mutual funds in August.

The mutual funds saw a 3.8 per cent erosion in their asset base in August to Rs 18,506 crore from the previous month, according to the data released by the Association of Mutual Funds in India (AMFI).

The industry now manages Rs 467623.45 crore in assets compared with Rs 486129.22 crore in July. 
 

BIGGEST LOSERS Loss in AUM from July levels
	Rs cr	% loss
DBS Chola MF	1137.54	22.44
DSPML MF	2603.70	16.19
Kotak Mahindra MF	3597.15	15.76
SBI MF	Rs 3829.14	14.79

High rates in March-April 2007 led to inflows in fixed maturity plans from corporates ad retail investors. However, as overnight rates went close to zero in June-July, banks turned large investors in liquid funds.

Subsequently, banks withdrew funds from funds in August after credit policy owing to higher cash reserve ratio requirement and because call rates went back to 6 per cent-plus levels, said fund managers.

Equity funds have witnessed lesser outflows compared with their debt counterparts despite market volatility. The Bombay Stock Exchange (BSE) benchmark index registered a growth of 2.56 per cent since the beginning of August.

Interestingly, several fund houses including Reliance Mutual Fund, Birla Sunlife Mutual Fund and Franklin Templeton Mutual Fund have opted for a hike in exit load in the last few months in as many as six of their equity schemes.

With markets wrecking havoc in August, retail investors may prefer to invest through mutual funds rather than in equities.

"Though the markets went down in this period, the impact on AUMs in terms of money coming from retail investors has been minimal since it is mainly institutions that invest in debt schemes,"said Raghavendra Nath, vice-president, marketing and strategy, Birla Sunlife Mutual Fund.

The period from January to June 2007 saw 41 new fund offerings on the equity side, which collectively raised Rs 16501.13 crore compared with 576 new funds on the debt side raising a total of Rs 100578.81 crore, according to Value Research data.

"Sometimes there is so much liquidity in the system that a lot of funds come with liquid funds. Shrinking AUMs are not as significant in such a context,"said T P Raman, managing director, Sundaram BNP Paribas Mutual Fund.

In fact, the mutual fund industry had seen an erosion in AUMs by as much as 7.56 per cent in March 2007 compared with February levels. September will see no respite for mutual fund houses as AUM figures are also expected to be lower, say industry observers.

Corporates may start withdrawing from liquid funds for advance tax payment purposes in September, added Raman