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Equity funds and Passive funds drive folios growth in FY22

In the highly complex world of mutual fund flows, the one variable that is a clear indicator of retail participation is the folio growth. Folios are accounts and normally an investor in a mutual funds needs one unique folio number per AMC

April 20, 2022 8:15 IST | India Infoline News Service
In the highly complex world of mutual fund flows, the one variable that is a clear indicator of retail participation is the folio growth. Folios are accounts and normally an investor in a mutual funds needs one unique folio number per AMC. While folios are not exactly representative of individual investor accretion, they are broadly indicative of retail interest. A good way to gauge a robust year for mutual fund flows would be to look at the mutual fund folios accretion in FY22; i.e. folios as on Mar-22 versus Mar-21. All data is sourced from the month-wise fact-sheets of AMFI.

Folios of Open Ended Funds 9,61,88,826 12,88,53,769 3,26,64,943 33.96%
Folios of Closed Ended Funds 16,76,703 6,50,883 -10,25,820 -61.18%
Grand Total 9,78,65,529 12,95,04,652 3,16,39,123 32.33%

The table above capture the macro picture. The growth has come from open ended folios since the folios of closed ended funds has actually depleted. However, that is a trend that has been in vogue for some time now as most Indian investors have gravitated towards open-ended for its obvious benefits. Overall, net of the reduction in closed ended funds, Indian mutual funds saw folio accretion of 3.16 crore in FY22. That is nearly 4 times the mutual fund folio accretion of just 81 lakhs in FY21. Let us now turn to the category wise accretion of folios across debt funds, equity funds, hybrids and passive funds.

How folio accretion panned out for Debt Funds?

Fund Category Folios (Mar-21) Folios (Mar-22) Change (Nos.) Change (%)
Overnight Fund 1,23,221 5,60,319 4,37,098 354.73%
Floater Fund 2,51,799 2,62,624 10,825 4.30%
Medium Duration Fund 2,99,850 2,82,861 -16,989 -5.67%
Medium to Long Duration Fund 1,23,703 1,15,666 -8,037 -6.50%
Corporate Bond Fund 7,13,303 6,61,554 -51,749 -7.25%
Banking and PSU Fund 3,84,593 3,31,836 -52,757 -13.72%
Low Duration Fund 12,26,301 10,54,564 -1,71,737 -14.00%
Money Market Fund 4,84,464 4,16,283 -68,181 -14.07%
Gilt Fund 2,13,245 1,78,641 -34,604 -16.23%
Credit Risk Fund 3,26,233 2,71,688 -54,545 -16.72%
Short Duration Fund 6,98,566 5,76,126 -1,22,440 -17.53%
Long Duration Fund 29,840 24,559 -5,281 -17.70%
Dynamic Bond Fund 2,85,119 2,33,672 -51,447 -18.04%
Liquid Fund 22,28,970 17,53,074 -4,75,896 -21.35%
Gilt Fund with 10 year constant duration 57,385 44,766 -12,619 -21.99%
Ultra-Short Duration Fund 7,99,537 6,18,499 -1,81,038 -22.64%
Folios of Income Funds 82,46,129 73,86,732 -8,59,397 -10.42%

At the outset, the debt funds are predominantly invested in by institutions, corporates and HNIs; with retail accounting for a much smaller portion. That also explains why the overall folio numbers in debt funds are just a fraction of equity fund folios. Income funds overall saw -10.42% compression in folio numbers, clearing indicating that investors were looking at other options or shifting more allocation to equity and passives.

Out of the 16 categories of debt funds, only overnight funds and floater funds showed an accretion in folio numbers. While overnight funds are a treasury tool, the floater demand shows that investors are expecting yields to go up in line with the global Fed hawkishness. Out of the 14 categories of debt funds that showed fall in number of folios, the worst affected were categories like ultra-short duration funds, 10-year Gilt Funds, liquid funds, dynamic bond funds and long duration funds. After the Templeton fiasco, investors are wary of new-fangled mid-market debt products with too much discretion.

How folio accretion panned out for Equity Funds?

Fund Category Folios (Mar-21) Folios (Mar-22) Change (Nos.) Change (%)
Multi Cap Fund 13,96,229 30,82,531 16,86,302 120.78%
Small Cap Fund 50,55,627 78,70,459 28,14,832 55.68%
Sectoral/Thematic Funds 78,77,874 1,18,94,913 40,17,039 50.99%
Flexi Cap Fund 83,70,526 1,16,48,458 32,77,932 39.16%
Large & Mid Cap Fund 50,17,194 67,29,990 17,12,796 34.14%
Mid Cap Fund 66,60,657 87,05,192 20,44,535 30.70%
Focused Fund 39,27,912 50,67,076 11,39,164 29.00%
Large Cap Fund 1,05,81,870 1,24,44,858 18,62,988 17.61%
Dividend Yield Fund 5,02,856 5,67,533 64,677 12.86%
ELSS 1,26,04,158 1,38,96,408 12,92,250 10.25%
Value Fund/Contra Fund 37,49,461 40,22,810 2,73,349 7.29%
Folios of Equity Funds 6,57,44,364 8,59,30,228 2,01,85,864 30.70%

Active equity funds were the big drivers of folio growth. Nearly two third of the overall folio growth in FY22 was accounted for by active equity funds. There are 3 trends visible. The funds that saw the most NFOs in the year like multi-cap funds, sectoral funds, flexi cap funds and mid-cap funds were among the big folio accretion stories of FY22. The second trend was a lot of alpha hunting by investors. This saw a lot of folio accretion in mid-cap funds, small cap funds, sectoral funds etc.

However, on the downside, the general underperformers saw tepid folio accretion. For instance, categories like value funds, ELSS funds and dividend yield funds were the tepid performers in terms of folio accretion. That is understandable in a year when the Nifty itself gave returns of over 18% amidst volatility.

How folio accretion panned out for Hybrid Funds?

Fund Category Folios (Mar-21) Folios (Mar-22) Change (Nos.) Change (%)
Balanced Advantage Fund 28,40,426 42,45,466 14,05,040 49.47%
Conservative Hybrid Fund 3,81,152 5,04,505 1,23,353 32.36%
Equity Savings Fund 2,89,451 3,54,715 65,264 22.55%
Arbitrage Fund 4,38,567 4,99,685 61,118 13.94%
Multi Asset Allocation Fund 7,19,116 7,95,488 76,372 10.62%
Aggressive Hybrid Fund 47,53,093 50,50,651 2,97,558 6.26%
Folios of Hybrid Funds 94,21,805 1,14,50,510 20,28,705 21.53%

Hybrid fund threw an interesting picture. Overall folio accretion was 21.53% as the total number of folios crossed the 1.14 crore mark. The big 49.5% accretion in folios came from the Balanced Advantage Funds or Dynamic Funds, which also saw most high profile NFOs during the year. Interestingly, in terms of folio accretion, conservative hybrid funds did a lot better than aggressive hybrids, indicating that investors preferred to either run with the hares or hunt with the hounds.

How folio accretion panned out for Passive Funds?

Fund Category Folios (Mar-21) Folios (Mar-22) Change (Nos.) Change (%)
GOLD ETF 12,99,324 42,41,840 29,42,516 226.47%
Other ETFs 42,55,464 1,05,41,730 62,86,266 147.72%
Index Funds 10,14,993 24,69,089 14,54,096 143.26%
Fund of funds investing overseas 6,96,682 12,54,895 5,58,213 80.12%
Folios of Passive Funds 72,66,463 1,85,07,554 1,12,41,091 154.70%

Finally, we come to the rather interesting story of passive funds. Folio accretion, despite a low base, was impressive at 155% yoy. However, the number of passive folios at 1.85 crore is just behind active equity funds. The two big stories from the folio growth in FY22 are; the equity shift is almost inexorable and investors are increasingly looking at passive asset classes.

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