The average asset under management (AAUM) of the mutual fund industry dropped by 1.6 per cent in July 2010 largely due to fall in assets of debt funds. The average AUM in July was Rs 6,66,667 crore compared with Rs 6,77,615 crore in June.
Uncertainty ahead of the Reserve Bank of India's (RBI's) policy rate hikes and implementation of new valuation norms for ultra short-term funds led to a drop in most debt funds, Sudipto Roy, Business Head of Principal Mutual Fund, said.
Outflow from debt funds
Average AUM of ultra short-term funds (earlier called liquid plus funds) dropped 18 per cent to Rs 1,64,500 crore in July from Rs 2,00,000 crore in Jun. Average AUM of sort-term floating rate funds witnessed a drop of 40 per cent, while long-term floating rate funds saw an 11 per cent dip in AAUM. Average assets of short-term and medium-term (-16 per cent) debt funds also fell by -4 per cent and -16 per cent respectively. However, AAUM of liquid funds rose by 32 per cent during the month.
From August 1, all ultra short-term funds are being valued on the basis of weighted average market price (mark-to-market) of securities held by them instead of the earlier practice of amortisation, where the value of securities keeps rising as the accrued interest is added to the NAV. The new valuation norm is likely to increase volatility in returns from ultra short-term funds.
Inflows in equity funds remain flat
In equity fund category, diversified equity funds and tax savings funds registered to 3 per cent increase in average AUM. "This could be attributed to the capital appreciation of equity funds rather than fresh inflows," said an official of a fund house.
Top fund houses witness drop in AUM
Reliance Mutual Fund continues to be the largest fund house in terms of average assets with an AAUM of Rs 1,02,179 crore in July, up 0.85 per cent over the previous month. HDFC Mutual Fund, despite a drop of 2.3 per cent in AAUM, remains the second largest fund house. Its AAUM in July was Rs 84,628 crore. ICICI Prudential, the third largest fund house in terms of assets, saw its AAUM falling by almost 7 per cent to Rs 68,742 crore during the month. UTI Mutual Fund (Rs 62,207 crore) and Birla Sun Life Mutual Fund (Rs 61,561 crore) were the other top five fund houses.
Of the 10 largest fund houses, only Reliance, SBI and Franklin Templeton Mutual Fund showed an increase in AAUM in July. SBI Mutual Fund, which replaced Franklin Templeton Mutual Fund as the sixth largest fund house, posted a 14 per cent jump in average AUM. LIC Mutual Fund showed the sharpest drop of 18 per cent in AAUM during the month.
IDBI Mutual Fund showed the maximum jump in percentage term with a 3,238 per cent increase in average AUM, mainly because of the lower base effect. The fund house started operations only in June 2010. Among others, JP Morgan Mutual Fund witnessed a 56 per cent rise in AAUM from Rs 4,030 crore to Rs 6,315 crore.
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