10 Mutual Fund trends visible in June 2020
Based on the AMFI data disclosures, we look at 10 key trends in terms of mutual fund investors, assets and their geographical spread
- Total AUM of Indian Mutual Funds is way below the peaks levels seen around Feb 2020. In February, the total AUM of the MF industry had touched a peak of Rs28.29 trillion. However, the subsequent COVID correction took the AUM down to Rs23.53 trillion by April 2020. Since then, the AUM has recovered to Rs26.07 trillion.
- On a YOY basis, the share of equity schemes in the overall MF AUM has dropped by 290 bps from 42.3% to 39.4%. During the same period, the share of debt schemes has been static. However, liquid funds have gained 150 bps in market share and ETFs and passives have gained another 140 bps in terms of market share as of June 2020.
- The share of individual investors has fallen sharply in the last one year since June 2019. Individuals comprise just 50.5% in value terms of the overall MF AUM compared to 54.3% share in Jun-19. During the same period, the share of institutional investors has gone up from 45.7% to 49.5%, largely explained by the depletion in equity values.
- The trend of institutional investors sticking to non-equity funds continues. For example, institutional investors accounted for 59% of assets in debt schemes, 85% in liquid schemes and 91% in ETFs and FOFs. On the contrary, retail investors accounted for 87% of all holdings in equity funds as of Jun-20.
- Looking from a mutual fund asset allocation perspective, Institutions have allocated 77% of their assets to debt and liquid schemes and 10% to ETFs. In the case of individuals, 68% of their allocation is to equity funds and 23% in debt. The onus of equity fund risk still rests largely on individual investors. As a result, individuals have seen value destruction in the last one year while institutions have seen value accretion.
- As of June 2020, nearly 85% of the total assets of the mutual fund industry still come from the T-30 cities (which are the top-30 cities in India by size and population). While only 15% of total MF assets are coming from the B-30 (next 30 cities), a big chunk of the B-30 assets are in the form of equity funds. That could mean a good spread of the equity cult in smaller towns as well as the fact that most of the institutional investors are essentially based out of large cities and hence this data could be slightly skewed.
- An interesting analysis is on the preference for direct versus regular schemes. Overall, 47% of the investors in India by value prefer to use the Direct Route. But the skewness of this figure is apparent when you look at the investor wise break up. Just about 14% of the retail investors and 23% of HNIs opt for the direct route. On the other hand, close to 75% of the institutions and corporate investors adopt the direct route. In short, the retail investors who were supposed to benefit from Direct Investments and save on costs are not really getting the full advantage.
- This above trend is clearer when we look at the fund mix. 72% of liquid funds and 55% of debt funds come via the direct route whereas only 19% of the equity funds come via the direct route. Clearly, individuals still do not appear to be too comfortable with the concept of direct investing as of date.
- Investor folios (not investors, but accounts) had shown a downward trend between 2009 and 2014 as the total number of investor accounts fell from 4.76cr to 3.95cr. However, since September 2014, the number of folios has more than doubled from 3.95cr to over 9.03cr folios. This can be largely attributed to a rapid spread of equity funds and SIPs among retail investors.
- Finally, for all of us who have been fretting about too much of churning in mutual funds by individual investors, more than 41% of the equity fund investments in India are held for a period of more than 2 years. That probably explains why MF flows have been robust via SIPs even as overall markets have been tepid. That could be the good news!