The average asset under management (AAUM) of the mutual fund industry jumped 3.3 per cent to Rs 6,89,542 crore in August on strong inflows from institutions and banks into ultra-short term funds.
Akshay Gupta, chief executive officer, Peerless Mutual Fund, said that the liquidity situation has slightly eased and so banks and institutions are bringing back the money into mutual funds. “It has been over two months since the 3G auctions payments were made and the liquidity situation has improved slightly in August, leaving surplus cash in the hands of banks and institutions.”
Average assets of ultra short-term funds (also known as liquid plus funds earlier), grew 50 per cent to Rs 1,19,984 crore during the month despite uncertainty over new valuation norms.
According to the new valuation norms, ultra short-term funds are to be valued at the daily average weighted price (mark-to-market) of debt papers held by them if these papers mature after 91 days. As the new valuation norms came immediately after the Reserve Bank of India hiked the rate at which it infuses and absorbs liquidity from the system, experts were of the opinion that net asset value of these funds would drop. However, all funds in this category showed positive return in the month of August.
Sudipto Roy, business head, Principal PNB Mutual Fund, said as most fund houses had realigned the portfolio of ultra short-term funds long before the new norms came into effect, returns as well as inflows remained positive in August.
However, most other debt category funds witnessed a drop in average AUM. Average AUM of liquid funds, which hold debt papers with maturity less than three-months, fell by 12 per cent during the month. Short-term floating rate funds' average assets dropped 40 per cent, while that of long-term floating rate funds dropped 20 per cent.
In equity fund category, diversified funds showed a jump of 1.5 per cent in average assets, while tax saving funds witnessed an increase of 2.3 per cent. Average assets of banking sector and index funds grew by 10.5 per cent and 6.8 per cent respectively. However, increase in AAUM of equity funds could be attributed to mainly capital appreciation.
In the hybrid category, debt-oriented hybrid funds that also include monthly income plans (MIPs) showed a 23 per cent jump in average assets during the month.
Reliance Mutual Fund continues to be the largest fund house with average asset under management of Rs 1,04,511 crore, up 2.3 per cent in August, followed by HDFC Mutual Fund (Rs 90,178 crore, up 6.6 per cent), ICICI Prudential Mutual Fund (Rs 68,795 crore, up 0.08 per), Birla Sun Life Mutual Fund (Rs 64,247 crore, up 4.3 per cent) and UTI Mutual Fund (Rs 64,172 crore, up 3.2 per cent).
Meanwhile, average AUM of Franklin Templeton Mutual Fund increased by 13 per cent to Rs 40,908 crore in August as it surpassed SBI Mutual Fund to become the sixth largest fund house. Among the top 10 fund houses, LIC Mutual Fund witnessed the sharpest drop of 14.5 per cent in average AUM during the month.
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