Mutual funds investments see sharp swings since ’09

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The mutual fund industry is characterised by a variety of schemes in which individuals, companies, institutions and others invest. Investor funds flow in and out of these schemes on a dynamic basis, since a vast majority of them are open-ended.

The flows in both directions show wild swings, as a Financial Chronicle analysis of the longer-term trend in net flows reveals that the volatile nature of net flows undoubtedly keeps fund managers on their toes. They have had to manage their scheme portfolios through dynamically-changing redemptions and new subscriptions. The analysis is based on AMFI’s monthly flow data as captured by Capitaline NAV.

In the past four calendar years, the category of income funds saw the highest gyrations. Swings were also seen in the category of balanced fund schemes where, however, the quantum of flows was much smaller than in income funds.

Equity schemes saw the least fluctuations but the intensity of the negative net flows, was very high. With the exception of 2011 when it saw net inflows of Rs 6,900 crore, equity schemes registered net outflows in the other three years. The category saw heavy bleeding in 2010 (Rs 16,200 crore) and 2012 (Rs 14,100 crore).

In 2009, with the world economy battered, investors in equity schemes did not display any knee-jerk reaction, as the net outflow that year was just Rs 80 crore.

The opposite trend was seen in the debt schemes. After a net outflow of Rs 300 crore in 2009, the category saw net accretions of Rs 6,200 crore in 2010, Rs 19,600 crore in 2011 and Rs 16,300 crore in 2012.

The inclination of investors to the gold asset class was evident. Net inflows in gold exchange traded funds (ETFs) rose between 2009 and 2011. Only in 2012 did the gold rush subside, with net inflows declining to Rs 1,800 crore. The net inflows were Rs 480 crore in 2009, Rs 1,730 crore in 2010 and Rs 4,050 crore in 2011. The high net inflow in 2011 resulted in gold ETFs contributing to more than a fifth of the mutual fund industry’s entire net inflow of Rs 19,700 crore that year. It was the first time when a new asset class contributed to the industry’s growth in such a big way.

Other fund categories with smaller asset size also saw interesting swings in the flows in both directions. The year 2012 saw tax-saving equity schemes lose a net of Rs 1,500 crore for the first time in the four years.

At the end of 2012, income funds made up for 50 per cent of the industry’s total assets of Rs 7,60,000 crore. Equity funds and liquid funds had shares of 22 per cent and 20 per cent, respectively, while tax-saving funds accounted for just 3 per cent. Balanced funds and gold ETFs each contributed 2 per cent.

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