Year-end redemptions shave 6% off MFs' AUM
Volatile markets and year-end accounting considerations have shaved 6% off assets under management (AUM) of the mutual fund industry in March. Choose a mutual fund by its theme
By Bakul Chugan, TNN |
Volatile markets and year-end accounting considerations have shaved 6% off assets under management (AUM) of the mutual fund industry in March. But if past trends are any indication, much of that money should flow back in April, say industry watchers. At Rs 5,27,706 crore (as of March 2008), the AUM is the lowest in the past three months.
Heavy redemptions in liquid funds by corporates and banks have caused this erosion in AUM in March. According to industry experts, this is a common phenomenon and the money normally flows back into the industry in the following month. The historical data on the movement of AUM also supports this view.
An analysis of data since 2002 shows that barring in 2006, it has been a common phenomenon to see the AUM fall during the year end, only to be compensated in April. So where March 2007 saw the AUM decline by 7.6%, the following April witnessed a positive growth of 7.4%. Similarly, an erosion of 2.4% in AUM in March 2005 was adequately compensated by a 6% growth in the following month.
Heavy redemptions in liquid funds by corporates and banks have caused this erosion in AUM in March. According to industry experts, this is a common phenomenon and the money normally flows back into the industry in the following month. The historical data on the movement of AUM also supports this view.
An analysis of data since 2002 shows that barring in 2006, it has been a common phenomenon to see the AUM fall during the year end, only to be compensated in April. So where March 2007 saw the AUM decline by 7.6%, the following April witnessed a positive growth of 7.4%. Similarly, an erosion of 2.4% in AUM in March 2005 was adequately compensated by a 6% growth in the following month.
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Redemptions in the liquid funds were responsible for much of this year-end erosion in AUM. As far as the equity funds are concerned, the fund managers appeared unruffled. According to Lotus India Asset Management CEO Ajay Bagga, ���Equity funds are estimated to have had net inflows of Rs 7,000 crore and the influx of funds into equity linked savings schemes (ELSS) is projected at Rs 1,300 crore for March 2008.���
Fund managers have also denied heavy redemptions in their equity schemes, but admit that inflows have slowed down because of the uncertain outlook on the markets. Says Amfi chairman AP Kurian: ���Inflows have been lower on account of 20-30% decline in NAVs. It���s normal for NAVs to erode in such markets. However, NAVs at these levels are an attractive buy and investors must make most of this opportunity.���
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