Share of money market funds highest in direct plans AUM

AUM of liquid funds under direct plans rose by Rs. 244 billion to cross the Rs. 1.04 trillion mark as of June

July 30, 2013 3:27 IST | India Infoline News Service
Money market funds (liquid and ultra short term funds) contributed the most to average AUM (assets under management) of direct plans in absolute terms, according to study by CRISIL Research.

AUM of liquid funds under direct plans rose by Rs. 244 billion to cross the Rs. 1.04 trillion mark as of June. These funds form half the average AUM of the category, the other half being regular plans. AUM of ultra short term debt funds under direct plans rose by Rs. 162 billion to Rs. 359 billion (34% of the category) as of the latest quarter, it added.

Rise in AUM of direct plans in these categories is an outcome of more institutional investors (who dominate the category) shifting to less expensive plans.

As per data released by the Association of Mutual Funds in India (AMFI) in March 2013, corporates contributed 80% of the Liquid/Money Market category AUM.

AUM of debt oriented funds (excluding liquid and ultra short term funds) under direct plans rose almost three times during the quarter to Rs. 695 billion as of June from Rs. 247 billion as of March. Within the debt-oriented funds, fixed maturity plans (FMPs) saw maximum rise in AUM.

In future, more institutional investors and high networth individuals are likely to shift to direct plans as these investors are far more capable at taking informed investment decisions. Retail investors too could start shifting to these plans as awareness about the benefits of these plans increases. Retail investors can use mutual fund rankings in the public domain and invest directly in top ranked funds.

Average AUM of direct plans offered by mutual funds rose by almost 70% to Rs. 2.14 trillion during the June quarter from Rs 1.27 trillion in the March quarter.
Direct plans came into existence after the Securities and Exchange Board of India asked fund houses to provide investors with direct access to mutual fund schemes sans any distributor costs. Direct plans enable investors to invest directly through the fund house instead of distributors. The total expense ratio of direct plans is lower than that of regular plans to the extent of distribution costs. Returns from these plans are thus higher than returns from regular plans.

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