Equity mutual funds suffer net outflows for the sixth month in a row

Continuing redemptions and a drop in sales led to a net outflow of Rs1,525 crore for the month of November 2012

From June 2012 to November 2012, over Rs10,000 crore has flowed out of equity mutual funds. Though the quantum of redemptions was much lower than that of the previous three months, the new inflows through sales could not balance the outflows. The total equity assets under management, in the month of November, increased by 3.5% to Rs1.90 lakh crore, whereas, the Sensex moved up by 4.5% over the same period. For the calendar year, equity schemes witnessed just two months of positive net inflows. There have been just seven new fund offers (NFOs) launched during the last 11 months. The latest NFO—Goldman Sachs India Equity Fund—was able to amass just Rs67 crore in the last month.
 

Sales for the past month declined by 12% year-on-year to Rs2,777 crore from Rs3,173 crore last November. This is the fourth month in a row where sales have declined continuously month-on-month. Except, for a peak in sales in February and March (above Rs3,500 crore), sales, for other months, varied between Rs2,900 crore to Rs3,350 crore.

Mutual fund companies have tried promoting systematic investment plans aggressively. Some fund houses have launched variations of SIPs as well like—Flex STP, Power Sip, etc. (Read more: Systematic investment plans: Sipping flexibly) However, equity sales have not shown any improvement with the introduction of these new plans. In fact, according to a recent study by Computer Age Management Services (CAMS), a large portion of SIPs were withdrawn before the completion of their tenure. (Read: Mutual fund SIPs decline further. Who is to blame?) This implies that no efforts have been taken to retain SIP investors by educating them of the benefits of continuing with the plan.
 

Net SIP registrations have been negative each month from April 2012 to September 2012. The SIPs ceased or expired has been a greater number than new SIP registrations leading to a decline of nearly  3.09 lakh SIP accounts despite the fact that the number of new SIP registrations was showing a rising trend from June 2012 to September 2012. And now with the consolidation of plans according to the new regulations, the SIP accounts are expected to decline further.

Comments
GOVIND GOPAL SHANBHAG
1 decade ago
Jason - What is fund houses doing to retain and/or reward long term investors. I n my family members have been investing and our investment is in excess of Rs.12.00 lacs and some of the investments are more than 10 years, Apart from ELSS we have investment in other funds also. There is no proper laid down system in change of bank details and procedure changes from fund to fund. I hv been struggling to change the bank mandate from ICICI bank to SBI with Fidelity, I even wrote a complaint to CEO of Fidelity but nothing is moving positively. My investment in recent years have been changed but earlier investment has not been changed at all. Fund houses do not care if a loyal customer like us leave or remain invested.
Vikas Gupta
Replied to GOVIND GOPAL SHANBHAG comment 1 decade ago
Dear Govind ji,
Please hand over all your MF Operation related problems to your advisor. This is His/Her duty to get them done.
GOVIND GOPAL SHANBHAG
Replied to Vikas Gupta comment 1 decade ago
Gupta Jee - I am tired calling my adviser who is too busy. Now I have to go to their Nariman Point Office with original with my office to settle the issue. When I visit MF offices, I really get bugged looking at their life style, super posh office etc. You will not believe, I have seen myself fidelity staff use mineral water to wash their face, hand when taps were not dry. This dirty show of wasting money at whose cost?
Jason Monteiro
Replied to GOVIND GOPAL SHANBHAG comment 1 decade ago
Mr Shanbhag,
You must be aware that L&T MF has now taken over Fidelity, and the fundamental attributes of some of Fidelity schemes have changed.

We have written about it here.. http://www.moneylife.in/article/fidelity...
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