On an overall basis, the average AUM of MF may be up by 12.08%, but this is more than adequately explained by the accretion in debt fund flows and the 9.18% appreciation in the Nifty. The chart below captures the AUM of the one-trillion club; AMCs with an average AUM of over Rs100,000cr.
Concentration continues to be the name of the game
There is clear concentration of AUM in a handful of top AMCs. Out of the 45 asset management companies (AMCs) operational in India, the top-5 AMCs account for 58% of the total AUM. If you go a step ahead and consider the top-10 mutual funds by AUM, then the concentration ratio is as high as 83%. The other 35 AMCs jointly account for just about 17% of the total AUM of mutual funds in India.
The other broad takeaway is that bancassurance model is the underlying story of the leaders. The top 3 by AUM are obviously the bancassurance plays. But even if you look at the top 10 in terms of AUM, 6 out of the 10 are bancassurance plays. This includes SBI MF, HDFC MF, ICICI Pru MF, Kotak MF, Axis MF and IDFC Mutual Fund. The bancasurrance model seems to be giving mutual funds a clear and visible advantage in terms of AUM build-up.
Which AMCs are growing and which are not?
If you look at the mutual fund AUM accretion on a QOQ basis, there are 10 funds that have shown AUM accretion of more than 15%. If you look at the top-10 funds, then all of the AMCs have managed to grow their AUM on QOQ basis with the sole exception being Templeton MF. In the case of Templeton, the negative growth is due to the negative press the fund has got after it froze funds worth Rs26,000cr. This was after its liquidity got trapped in illiquid debt instruments.
Apart from Templeton that showed negative growth, Sundaram MF and L&T Mutual Fund grew at less than the Nifty Returns of 9.18%. The real surprise was HDFC Mutual Fund with AUM growing of just 5.43%. It was the second worst growth performer in the top-20, apart from Templeton MF.
Overall, if you look at the top-20 listthe ranking almost remains the same as Jun-20. The only difference is that SBI Mutual Fund has substantially widened its AUM lead over HDFC Mutual Fund, the second largest in terms of AUM.
What have been the triggers for the AUM growth?
In the Jun-20 quarter, the growth in AUM came from Nifty appreciation. The Nifty had rallied sharply post March 24th, after it bottomed out around 7600 levels. From that level, the Nifty rallied more than 40% by the end of June 2020. The returns in the September quarter are not as exciting as the June quarter. So what generated this AUM growth?
If one looks at the flows data for July and August 2020, the big growth in AUM must have come from the debt segment. Equity funds saw negative net flows in July and August and the indications from the daily DFI flows are that September could be another month of net equity fund outflows. SIPs have remained above the Rs7500cr mark but the lump-sum selling in equity funds is getting sharper.
FOFs may be coming of age
Fund of funds are still too small in terms of overall AUM to really look at growth numbers. However, the good news is that on a QOQ basis, we have seen 32% accretion in FOF AUM at Rs18,374cr. With international marketsoutperforming, there is rising demand for international FOFs pegged to global indices. The other area of demand for FOFs comes from improved demand for solution-oriented funds that normally deploy the FOF model. With SEBI getting more stringent on the way funds are managed by mutual funds and their asset mix, solution-oriented funds may become increasingly relevant to investors. That is what is evident in the AUM data for Sep-20.