Equity funds and Passive funds drive folios growth in FY22

20 Apr 2022 , 08:15 AM

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.