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Annual financial results, which is what corporate analysts live by, have very little relevance in the world of mutual funds. Funds declare their NAVs daily and the portfolios periodically. This means that when asset management companies reveal their annual financials, there is little information that is of direct interest to investors. While financials of AMCs are rarely interesting, investors could find other supplementary information—most of it is mandated by SEBI's disclosure norms--worth their while.
At Value Research, we collate such information and add it our database. And when we compare and analyse such data across the entire industry, some interesting patterns emerge.
Take the concentration of investor holdings in certain funds, for example. Most of us assume that each mutual fund is made up of a large number of investors--after all that's supposed to be the whole logic behind the industry's existence. However, in India a handful--sometimes just one or two--investors account for extraordinarily high proportion of many funds' assets.
In the case of income funds— which constitute 58 per cent of the industry--it is considered to be a norm nowadays that around 70 per cent of the investments come from institutional investors--many of whom tend to make large investments in a few funds. While the highest concentration occurs in fixed maturity plans—which are expressly designed for such investments--and shorter duration plans, all types of funds have some examples of the kind.
Although there are 17 funds that have just one investor, only five of them are more than Rs 10 crore. The largest being Chola Gilt Series-2003, which has its entire corpus of Rs 170.43 crore coming from a single investor.
When one looks at the actual size (not a percentage) of one or two investors' holdings that dominates a fund's corpus, the highest is Prudential ICICI Floating Rate Plan, a Rs 528-crore fund with Rs 500 crore from a single investor; Rs 222.3 crore of Prudential ICICI Income Long Term Plan's Rs 234.32 crore (95 per cent) comes from just two investors; Magnum InstaCash (Cash) has Rs 188.88 crore from a single investor, but that is 43.62 per cent of this Rs 433.01-crore fund.
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However, fund managers generally consider large investors to be more stable. Funds tend to stay in touch directly with large investors to be aware of their redemption plans. Small invest-ors can just as easily create a run of sorts on a fund at the worst time possible. When the markets move down sharply, small investors can disinvest in a hurry, forcing the fund manager to quickly sell his best stocks.
So if you are planning to invest in a very small equity fund, it may be beneficial to know about the investor concentration it has. Of course, there is an additional caveat to the analysis we've done. Unlike NAVs and portfolios, this data is released only once every six months; and in the fast moving mutual funds industry, a lot may have changed since the last data was released.
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