Mutual funds’ AUM declined 18% in March

At a time when Covid-19 is possibly the prime reason behind everything that is negative in the investing world, the major decline reported in assets under management in the mutual funds industry is not on account of the pandemic. According to the Association of Mutual Funds in India (AMFI), the industry’s net assets under management (AUM) at the end of March 2020 stood at ₹22.26 lakh crore. This was lower by over ₹4.96 lakh crore, or 18.24%, compared to ₹27.23 lakh crore the industry reported a month ago.

Compared to a year ago, the decline is in excess of ₹1.53 lakh crore, or 4.97%, compared to ₹23.79 lakh crore reported in March 2019. Also, the decline in this March is particularly stark given that the industry saw an inflow of over ₹63,181 crore in March last year.

AMFI’s chief executive N.S. Venkatesh believes that unprecedented situations warrant equally unprecedented response to help make the most of the crisis opportunity. “This precisely sums up the retail investor riposte,” says Venkatesh. “Instead of exiting their investment in equity funds, retail investors have not only held on, but added more AUM and folios,” he adds.

From a little over 88.83 crore in February, the total number of investor folios increased by 1.02% to a little over 89.74 crore. Within these, equity oriented schemes homed 62.69 crore folios in March, 1.14% higher than February’s 61.98 crore folios. Importantly, while the monthly folio growth was miniscule, the funds mobilised through equity oriented schemes grew from ₹24,784.59 crore in February to ₹30,101.19 crore in March – a month increase of ₹5,316.6 crore, or 21.45%.

However, the case with debt funds was completely different. Compared to ₹12.22 lakh crore in February, debt oriented schemes net AUM came down by ₹1.93 lakh crore, or 15.8%, to ₹10.29 lakh crore in March. Liquid funds saw the maximum decline within debt schemes, as net AUM of ₹4.43 lakh crore in February, saw a decline of ₹1.08 lakh crore, or 24.46%, to over ₹3.34 lakh crore in March.

“On the debt side, the decline in AUM is on account of quarter end phenomena – banks maintaining capital adequacy norms and corporates fulfilling advance tax obligations,” says AMFI’s Venkatesh. “These funds would return in April," he adds with optimism.

That investor appetite was strong in a month, where benchmark indices saw tremendous volatility, and systematic investment plans (SIPs) continued to see higher mobilisation. At ₹8,641 crore in March, SIPs grew by ₹128 crore, or 1.51% compared to February’s ₹8,513 crore.

On an annual basis, compared to ₹8,055 crore in March 2019, this year’s growth was of over ₹586 crore, or 7.2%. And, for FY20, equity SIP mobilisation added up to ₹1,00,084 crore, ₹7,391 crore, or 7.97% higher than FY19’s ₹92,693 crore.

Interestingly, in March 2020, mutual funds’ net equity investments stood at ₹30,130.74 crore which was substantial compared to an outflow of ₹7,306.15 crore seen in March 2019.

Clearly, the mutual fund managers are not shying away from making the most of the fall in markets. And, MF investors are smartly reading the managers and executing their bets. The hope now is that MF investors also heed MF managers’ advice that mutual funds are for the long term also seriously.