WHY THE FOCUS ON BIG STORIES OF LAST 4 YEARS?
As fiscal year FY24 comes to an end, it is time to look back at how the mutual funds have grown over the last few years. We will consider the bottom of COVID 2020 as the base and, considering that the COVID bottom was hit on March 20, 2020, this marks the completion of 4 full years since the conclusion of the pandemic. There have been scores of reports in the recent past that the post-COVID period was decisive for the growth of the mutual funds in India. To a largely extent, that is already evident in the way the number of folios have grown and the way SIPs have become the core of retail investment portfolios. After the COVID shock of 2020, people are increasingly realizing the importance of being invested in equities for the long term. That is not just an India trend, but a global trend. But have mutual funds grown since pandemic purely due to the market appreciation or is it due to fresh flows too? In reality, it is a mix of both, as we shall see from the granular break-up of AUM growth.
MACRO STORY – HOW OVERALL AUM GREW SINCE THE PANDEMIC
Let us start with the macro picture. We have only looked at open ended funds, since closed ended funds now constitute less than 0.35% of the AUM. Here is a picture of how the net AUM has evolved overall over the last 4 years along with the CAGR growth in 4 years.
All Open Ended Funds | AUM Mar-24 | AUM Mar-23 | AUM Mar-22 | AUM Mar-21 | AUM Mar-20 | CAGR |
Open-Ended Funds AUM Total | 53,12,736 | 39,07,838 | 36,95,800 | 29,96,553 | 20,50,734 | 26.87% |
Data Source: AMFI (AUM figures are ₹ in Crore)
What are the quick takeaways from the overall AUM numbers? Obviously, this is a very macro picture of open ended funds and may only tell you so much. However, 26.87% growth in AUM across the board is phenomenal in the 4 years post the pandemic. Remember, this CAGR growth in this period, so effectively over the last 4 years, the overall AUM of mutual funds in India has grown 2.59 times. This has been supported by a mix of stock market index appreciation as well as robust inflows via SIPs and NFOs in the Indian markets. The story becomes a lot clearer when we look ag the category-wise picture.
ACTIVE DEBT FUNDS – STORY OF CAGR GROWTH SINCE COVID-19
Here is a picture of how the net AUM of active debt / income funds have evolved overall over the last 4 years along with the CAGR growth in this period.
Active Debt Funds | AUM Mar-24 | AUM Mar-23 | AUM Mar-22 | AUM Mar-21 | AUM Mar-20 | CAGR |
Long Duration Fund | 12,769 | 8,798 | 2,523 | 2,578 | 1,670 | 66.30% |
Gilt Funds (10-Year-Duration) | 4,742 | 3,760 | 1,261 | 1,500 | 941 | 49.81% |
Gilt Fund | 27,268 | 21,458 | 15,222 | 16,246 | 9,285 | 30.91% |
Money Market Fund | 1,48,893 | 1,08,468 | 1,14,219 | 89,758 | 57,017 | 27.12% |
Corporate Bond Fund | 1,47,361 | 1,30,767 | 1,30,073 | 1,60,125 | 81,730 | 15.88% |
Dynamic Bond Fund | 31,617 | 29,287 | 25,312 | 27,552 | 18,116 | 14.94% |
Floater Fund | 51,469 | 52,989 | 80,632 | 65,436 | 32,490 | 12.19% |
Ultra Short Duration Fund | 83,561 | 79,123 | 87,948 | 91,998 | 72,226 | 3.71% |
Banking and PSU Fund | 80,891 | 80,517 | 93,383 | 1,19,559 | 72,476 | 2.78% |
Low Duration Fund | 90,212 | 86,693 | 1,12,745 | 1,29,767 | 81,371 | 2.61% |
Liquid Fund | 3,63,510 | 3,32,498 | 3,45,903 | 3,36,598 | 3,34,725 | 2.08% |
Medium to Long Duration Fund | 10,497 | 8,895 | 10,055 | 10,390 | 9,805 | 1.72% |
Short Duration Fund | 99,004 | 91,239 | 1,15,856 | 1,45,662 | 93,444 | 1.46% |
Medium Duration Fund | 25,976 | 27,091 | 32,983 | 31,740 | 28,290 | -2.11% |
Overnight Fund | 61,314 | 95,626 | 1,03,071 | 71,009 | 80,174 | -6.49% |
Credit Risk Fund | 23,141 | 24,776 | 27,772 | 28,308 | 55,381 | -19.60% |
Active Debt Funds AUM Total | 12,62,224 | 11,81,982 | 12,98,961 | 13,28,226 | 10,29,142 | 5.24% |
Data Source: AMFI (AUM figures are ₹ in Crore)
The CAGR growth of debt / income funds since the pandemic has been just about 5.24%. That is very tepid growth. However, that is not surprising considering that with the sharp fall in rates, most of the funds automatically gravitated towards equities. Here are some of the key takeaways on the debt fund growth over the last 4 years.
Debt funds have not had the greatest of phases, but some of them did buck the trend.
ACTIVE EQUITY FUNDS – THE BIG GROWTH STORY POST-COVID
Here is a picture of how the net AUM of active equity funds have evolved overall over the last 4 years along with the CAGR growth in this period.
Active Equity Funds | AUM Mar-24 | AUM Mar-23 | AUM Mar-22 | AUM Mar-21 | AUM Mar-20 | CAGR |
Multi Cap Fund | 1,24,682 | 67,338 | 54,932 | 19,891 | 12,685 | 77.06% |
Dividend Yield Fund | 23,915 | 13,994 | 9,819 | 6,735 | 3,282 | 64.30% |
Small Cap Fund | 2,43,368 | 1,33,384 | 1,06,857 | 69,799 | 35,832 | 61.44% |
Sectoral/Thematic Funds | 2,97,358 | 1,72,819 | 1,48,830 | 98,080 | 49,844 | 56.28% |
Large & Mid Cap Fund | 2,05,737 | 1,27,842 | 1,10,143 | 76,428 | 42,972 | 47.92% |
Mid Cap Fund | 2,96,986 | 1,83,256 | 1,59,928 | 1,16,403 | 65,805 | 45.75% |
Value Fund/Contra Fund | 1,49,099 | 90,584 | 78,774 | 61,150 | 39,460 | 39.42% |
Flexi Cap Fund | 3,50,186 | 2,41,683 | 2,25,430 | 1,58,725 | 1,01,223 | 36.38% |
Focused Fund | 1,29,704 | 98,673 | 96,710 | 68,603 | 39,072 | 34.98% |
ELSS | 2,13,760 | 1,51,751 | 1,47,841 | 1,25,228 | 74,791 | 30.02% |
Large Cap Fund | 3,14,155 | 2,35,760 | 2,26,191 | 1,78,324 | 1,13,541 | 28.97% |
Active Equity Funds AUM Total | 23,48,949 | 15,17,082 | 13,65,456 | 9,79,367 | 5,78,508 | 41.95% |
Data Source: AMFI (AUM figures are ₹ in Crore)
The CAGR growth in equity fund AUM over the last 4 years has been an impressive 41.95%, which is a mix of flows and capital appreciation post the pandemic. Equity funds AUM as of March 2024 is 4.06 times the AUM as of March 2020. There is one small clarification here. The separation of multi-cap funds and flexi-cap funds only happened in FY21. To make them comparable, we have applied the same distribution ratio to split the overall corpus between multi-cap funds and flexi-cap funds for March 2020. Here are some of the key takeaways.
Overall, the equity fund story has been the story of the post pandemic period. Investors have gravitated towards equity in a big way, and SIPs have been the vehicle of choice.
HYBRID FUNDS – A SURPRISING WINNER POST THE PANDEMIC
Here is a picture of how the net AUM of hybrid funds have evolved over the last 4 years along with the CAGR growth in this period. Hybrids are combinations of asset classes.
Hybrid Funds | AUM Mar-24 | AUM Mar-23 | AUM Mar-22 | AUM Mar-21 | AUM Mar-20 | CAGR |
Multi Asset Allocation Fund | 67,280 | 26,591 | 19,582 | 14,795 | 9,439 | 63.39% |
Dynamic Asset Allocation/BAF | 2,48,798 | 1,91,810 | 1,78,863 | 1,07,883 | 77,091 | 34.03% |
Retirement Fund | 25,280 | 17,993 | 16,406 | 13,569 | 8,507 | 31.29% |
Arbitrage Fund | 1,53,009 | 67,435 | 95,217 | 74,530 | 52,210 | 30.84% |
Childrens Fund | 18,967 | 14,340 | 13,131 | 10,808 | 7,192 | 27.43% |
Equity Savings Fund | 29,567 | 16,012 | 16,664 | 9,759 | 11,229 | 27.39% |
Conservative Hybrid Fund | 26,871 | 23,170 | 21,074 | 12,916 | 11,190 | 24.49% |
Balanced Hybrid Fund | 1,97,197 | 1,53,899 | 1,48,519 | 1,23,075 | 1,00,990 | 18.21% |
Hybrid Funds AUM Total | 7,66,969 | 5,11,250 | 5,09,455 | 3,67,334 | 2,77,849 | 28.90% |
Data Source: AMFI (AUM figures are ₹ in Crore)
At a macro level, the AUM of hybrid funds have grown at an impressive 28.90% over the last 4 years, with all the 8 categories of hybrid / solution funds showing positive CAGR growth. The AUM of hybrid funds as of March 2024 is 2.76 times the AUM as of March 2020. It has been a surprising gainer post pandemic, and we shall look at the specific reasons. For starters, we have included solution funds also under the category of hybrid funds, due to the similarity of their structure and strategy. Here are some of the key takeaways.
Hybrid funds emerged as a smart alternative from an asset allocation perspective. Apart from equity and debt, allocation funds have emerged as a strong class of alternate funds.
PASSIVE FUNDS – THE REAL WINNER POST PANDEMIC
Here is a picture of how the net AUM of hybrid funds have evolved over the last 4 years along with the CAGR growth in this period. Hybrids are combinations of asset classes.
Passive Funds | AUM Mar-24 | AUM Mar-23 | AUM Mar-22 | AUM Mar-21 | AUM Mar-20 | CAGR |
Index Funds | 2,13,657 | 1,67,517 | 68,676 | 19,164 | 8,089 | 126.70% |
FOF Overseas | 25,713 | 22,991 | 22,609 | 12,408 | 2,734 | 75.12% |
Other ETFs | 6,64,000 | 4,84,277 | 4,11,362 | 2,75,931 | 1,46,463 | 45.92% |
GOLD ETF | 31,224 | 22,737 | 19,281 | 14,123 | 7,949 | 40.78% |
Passive Funds AUM Total | 9,34,595 | 6,97,522 | 5,21,928 | 3,21,626 | 1,65,235 | 54.22% |
Data Source: AMFI (AUM figures are ₹ in Crore)
As a fund category, the passive funds showed 54.22% CAGR growth in AUM post the pandemic. What has supported the rapid growth in index funds and index ETFs. As fund managers faced the twin challenges of volatility and kurtosis, investors realized that passive funds offered a delectable alternative. After all, when the Sensex has given 17% TRI returns over the last 45 years on a CAGR basis, it is tough to go wrong on any of the frontline indices. Add to it, there is the sharply lower cost, that itself works as a return compounder over a longer time frame. Not surprisingly, it is the passive funds that have emerged as the undisputed star in terms of asset growth post the pandemic!
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