Mutual Funds
Equity mutual funds witness net outflow for the fifth consecutive month

The net outflows from equity mutual fund schemes at Rs1,984 crore, which peaked to their highest in two years in September 2012, continued for the fifth straight month

The mutual fund reforms that came into force from 1st October didn’t seem to have a positive impact yet on the industry. The new regulations triggered a flurry of activity among both, fund houses and investors. Fund houses were busy implementing the single plan structure wherein the regulator has mandated the fund houses to have a single plan under all their schemes. This has led to the withdrawal of systematic investments and dividend reinvestments under plans of existing schemes that have been discontinued. Along with this, the increase in expense ratio allowed to be charged has had no effect. New inflows into equity schemes declined even further. The new inflows could not match with the redemptions, leading to a net outflow of Rs1,984 crore, according to monthly data from The  Association  of  Mutual  Funds  in  India (AMFI).

Also Read: Best Equity Mutual Funds for Any Season

Moneylife has written in the past how the Securities and Exchange Board of India’s (SEBI) regulations seem geared to benefit asset management companies (AMCs) rather than investors.(Read: SEBI’s mutual fund rules changes are patently anti-investor) Considering this has been just the first month since the implementation it would be interesting to see if SEBI’s  new reforms would be able to “re-energise the mutual fund industry” in the coming months.

Sales, which had touched Rs3,385 crore in August 2012—the highest in seven months, has been on a decline ever since. Sales for the month of October reached just Rs3,072 crore. The additional incentive, in the form of higher expense ratio, has yet to create an impact on sales. Redemptions, though 25% lower than the previous month, were still higher the average redemptions seen April 2012 to July 2012.

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Equity assets under management (AUM) fell by 2% over the month from Rs1.87 lakh crore to Rs1.83 lakh crore while the Sensex declined by 1.37% over the same period. Equity AUM has declined by nearly 5% from May 2011 where the equity AUM stood at Rs1.92 lakh crore when the Sensex was at the same level compared to last month. Over the last few years equity mutual fund sales have struggled and redemptions continued. For CY 2012, equity mutual fund schemes have seen a total outflow of Rs12,377 crore. The highest such redemptions were seen in 2010.


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4 years ago

Mutual funds are investment vehicles for savings .
In a high inflationary scenario it is difficult to have savings .
INFACT to maintain the lifestyle we have to dip into our savings .
i have closed two of my accounts and if inflation does not fall i will have to redeem the balance also as the company has said no increments or bonus infact they may reduce workforce


4 years ago

There seems to be a popular perception in the ‘Ivory tower’ circles that mutual funds inflows would increase with rising equity markets. These pundits have been proven to be wrong so far as the equity markets have gone up by 20% approx. and with the rising markets more mutual fund investors have chosen to redeem than invest.

About 50% registered MF agents / distributors have gone out of business, now who is going to sell and bridge the widening gap & how?

It may already be too late now to realize that instead of stopping mis-selling, we may have succeeded in stopping sales in a very very big way – while doing nothing to penalize those who have indulged in client abuse by churning/mis-selling in the past.

Although investing in mutual funds is simple, past mobilization data would reveal not many like to invest directly on their own, but prefer going through an agent. Even the direct route offering 0.5% - 0.7% savings per annum may not be a game changer as envisaged. Though we can wait and the results will be there for all to see

A deeper look may actually reveal that while most people seek the services of an agent while investing, they may prefer redeeming mutual fund units by themselves, on their own depending mostly on their individual situation (need for funds). The number of folios has come down by about 2 million . . . who will win them back and how?

We will soon realize, that though the agents / distributors are the weakest link in the Mutual Funds ecosystem, they are also the most critical, as they are the ones who mobilize assets for the MF industry. If there are not enough assets what will the AMCs manage?

The ground realities shall finally prevail over the bird’s eye view. . .

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