AUM Accretion July 2024 – Net flows versus Price Spike

28 Aug 2024 , 10:25 AM

BREAKING UP THE AUM ACCRETION STORY

The AMFI reports the net assets under management (AUM) each month for the mutual funds segment overall as well as across each class of assets. These classes of assets include active debt funds, active equity funds, Hybrid Funds, and passive / index funds. There is something very interesting about the AUM accretion that one needs to understand. When you see the difference in AUM in the current month over the previous month, that AUM is triggered by two factors. The first is the actual net flows coming into the fund; either in the form of SIP flows, or lumpsum flows, or through NFOs. These 3 combined, net of the redemptions, give you the net inflows into mutual funds. However, the AUM accretion is determined by one more very important factor; and that is price appreciation.

Remember, the AUM is the value of the fund holdings. Obviously, when the indices like the Nifty and Sensex are racing towards new highs, it is only obvious that the AUM will also increase. This is irrespective of whether there are fresh flows into the fund or not. What causes this value accretion. In the case of equity funds, the value accretion comes from a spike in the indices, which takes most stocks along with it. For debt funds, the market accretion comes from lower bond yields. Now, these bond yields will come down either due to falling interest rates in the economy or expectations of lower interest rates. Let us what has triggered the shift in AUM in mutual funds in July 2024 over June 2024. This is broken up into the flows and the price accretion and we also measure price dominance. That is the extent to which price accretion dominates the AUM change.

AUM  ACCRETION STORY OF ACTIVE DEBT FUNDS

Active debt funds in India is a rather wide classification of debt funds / income funds. It includes funds at the short end and the long end of the yield curve. It also includes funds with fixed rate and floating rate returns. It also includes debt funds that are rule based as well as debt funds that are discretion based. However, this list excludes debt index funds and debt index ETFs; which is included under the header of passive funds.

Active Debt Market Funds	Net Inflow in the Fund	AUM Closing Value	AUM Accretion	Price Accretion	Price Move Dominance
Gilt Fund with 10 year duration	-42.15	4,496.06	8.36	50.51	604.16%
Banking and PSU Fund	-307.93	79,123.09	366.78	674.71	183.95%
Medium to Long Duration Fund	57.42	11,052.02	157.40	99.99	63.52%
Floater Fund	314.42	53,349.19	797.24	482.82	60.56%
Dynamic Bond Fund	206.60	33,069.71	500.48	293.89	58.72%
Corporate Bond Fund	2,261.04	1,54,280.13	3,631.74	1,370.70	37.74%
Low Duration Fund	1,902.32	1,05,025.57	2,659.28	756.96	28.46%
Short Duration Fund	2,602.91	1,05,624.06	3,542.54	939.63	26.52%
Gilt Fund	1,261.63	33,302.06	1,549.69	288.07	18.59%
Long Duration Fund	786.75	15,324.77	901.64	114.89	12.74%
Overnight Fund	4,451.62	70,482.15	4,965.24	513.62	10.34%
Ultra Short Duration Fund	8,206.86	1,04,537.99	8,877.78	670.92	7.56%
Money Market Fund	28,738.03	2,34,400.75	30,263.60	1,525.58	5.04%
Liquid Fund	70,060.88	4,93,493.47	73,237.27	3,176.39	4.34%
Credit Risk Fund	-542.83	21,789.60	-356.97	185.86	-52.07%
Medium Duration Fund	-369.96	24,830.59	-152.90	217.05	-141.95%
Grand Total	1,19,587.60	15,44,181.20	1,30,949.18	11,361.59	8.68%

Data source: AMFI (absolute figures are ₹ in Crore)

The table above breaks up the AUM accretion of each category of debt fund in July 2024 into the contributions of net flows and price impact. The funds have been ranked based on the dominance of the price impact on the AUM accretion on each category and overall. Here are some key takeaways.

• Overall, the net accretion in the AUM of debt mutual funds in July 2024 was to the tune of ₹1,30,949 Crore. This was composed of ₹1,19,587 Crore of fresh net inflows into debt funds while the balance ₹11,362 Crore came from price accretion. In short the contribution of price accretion was just 8.68% in the AUM accretion in July 2024 while net inflows into debt funds contributed the balance 91.32%.
• Let us look at the categories of debt funds with the price accretion dominance. Gilt funds with 10 year duration and banking & PSU funds saw the maximum contribution coming from price accretion in the overall AUM accretion. Ironically, both these categories of debt funds saw negative net inflows in the month of July 2024. This price impact was visible in longer duration debt due to expectation of a fall in yields.
• Out of the 16 categories of debt funds, 14 categories saw positive contribution from price accretion dominance and only two categories of funds saw negative contribution coming.

If you leave out the two funds at the bottom, the other categories have seen strong contribution from the price factor. That is on the back of rate cut expectations.

AUM  ACCRETION STORY OF ACTIVE EQUITY FUNDS

Active equity funds in India covers a wide range of thematic funds and diversified funds. Interestingly, in recent months, it is thematic funds that have seen their AUMs surge big wan and they have even overtaken flexi-cap funds to become the biggest category of active equity funds in terms of market cap. However, this list excludes equity index funds and equity index ETFs, which are included under the header of passive funds.

Active Equity Market Funds	Net Inflow in the Fund	AUM Closing Value	AUM Accretion	Price Accretion	Price Move Dominance
Focused Fund	-620.24	1,48,161.60	4,779.22	5,399.47	112.98%
ELSS	-637.63	2,49,507.00	10,485.14	11,122.77	106.08%
Large Cap Fund	670.12	3,61,031.14	15,669.49	14,999.37	95.72%
Mid Cap Fund	1,644.22	3,78,543.83	19,117.65	17,473.43	91.40%
Small Cap Fund	2,109.20	3,13,488.18	17,079.73	14,970.54	87.65%
Flexi Cap Fund	3,052.92	4,20,165.97	18,779.90	15,726.98	83.74%
Value Fund/Contra Fund	2,170.78	1,85,631.54	11,734.03	9,563.25	81.50%
Large & Mid Cap Fund	2,622.29	2,57,266.49	13,677.11	11,054.81	80.83%
Dividend Yield Fund	630.78	30,683.98	2,454.69	1,823.91	74.30%
Sectoral/Thematic Funds	18,386.35	4,21,112.36	37,841.17	19,454.82	51.41%
Multi Cap Fund	7,084.61	1,68,365.86	14,340.93	7,256.33	50.60%
Grand Total	37,113.39	29,33,957.95	1,65,959.07	1,28,845.68	77.64%

Data source: AMFI (absolute figures are ₹ in Crore)

The table above breaks up the AUM accretion of each category of equity funds in July 2024 into the contributions of net flows and price impact. The funds have been ranked based on the dominance of the price impact on the AUM accretion on each category and overall. It needs no genius to guess that price accretion will dominate. Here are some key takeaways.

• Overall, the net accretion in the AUM of equity mutual funds in July 2024 was to the tune of ₹1,65,959 Crore. This was composed of ₹37,113 Crore of fresh net inflows into debt funds while the balance ₹1,28,846 Crore came from price accretion. In short the contribution of price accretion was 77.64% in the AUM accretion in July 2024 while net inflows into equity funds contributed the balance 22.36%.
• Let us look at the categories of equity funds with the price accretion dominance. Focused funds and ELSS funds saw the maximum contribution coming from price accretion in the overall AUM accretion. Ironically, both these categories of equity funds saw negative net inflows in the month of July 2024. This price impact was visible in these two categories more due to the appreciation in the Nifty and Sensex as well as a rally in smaller indices. Multi-cap funds and thematic funds saw the lowest contribution from price accretion and that can be attributed to strong flows from NFOs in these categories.
• Out of the 11 categories of equity funds, all the 11 categories saw positive contribution from price accretion dominance with even the funds at the bottom seeing, at least, 50% contribution coming from the price accretion and only balance from net flows.

If you leave out the two funds at the bottom, the other categories have seen strong contribution from the price factor of 75% and above. That is on the back of a sharp rally in most generic and thematic indices in July.

AUM  ACCRETION STORY OF HYBRID FUNDS

Hybrid funds in India is a rather wide classification of fund that combine equity and debt in varying proportions. Some of them even use derivatives extensively to replicate debt returns with equity tax treatment. Only arbitrage funds are more of a debt fund in terms of the nature of the fund. Rest are combinations of equity and debt with smaller portions of other asset classes too. This list includes discretionary and non-discretionary funds.

Hybrid and Retirement Funds	Net Inflow in the Fund	AUM Closing Value	AUM Accretion	Price Accretion	Price Move Dominance
Aggressive Hybrid Fund	195.48	2,21,973.33	7,701.58	7,506.10	97.46%
Conservative Hybrid Fund	25.69	28,307.35	526.34	500.64	95.12%
Children’s Fund	79.31	22,086.81	838.12	758.81	90.54%
Retirement Fund	147.16	29,903.39	1,190.25	1,043.08	87.64%
Dynamic Asset Allocation / BAF	1,797.56	2,79,986.07	10,214.19	8,416.63	82.40%
Multi Asset Allocation Fund	3,125.51	89,592.72	5,872.75	2,747.24	46.78%
Equity Savings Fund	1,277.10	35,571.79	1,417.37	140.27	9.90%
Arbitrage Fund	11,014.75	1,89,349.31	9,278.60	-1,736.15	-18.71%
Grand Total	17,662.56	8,96,770.78	37,039.18	19,376.62	52.31%

Data source: AMFI (absolute figures are ₹ in Crore)

The table above breaks up the AUM accretion of each category of debt fund in July 2024 into the contributions of net flows and price impact. The funds have been ranked based on the dominance of the price impact on the AUM accretion on each category and overall. Solution funds have been added to the hybrid funds for better reflection. Here are some key takeaways.

• Overall, the net accretion in the AUM of hybrid / solution funds in July 2024 was to the tune of ₹37,039 Crore. This was composed of ₹17,663 Crore of fresh net inflows into debt funds while the balance ₹19,367 Crore was through price appreciation, largely on the equity component of these hybrid funds. In short the contribution of price accretion was 52.31% in the AUM accretion in July 2024 while net inflows into hybrid funds contributed the balance 47.69%.
• Let us look at the categories of debt funds with the price accretion dominance. Aggressive hybrid, conservative hybrid and Children’s funds saw the maximum contribution coming from price accretion in the overall AUM accretion; at over 90% in each of these cases. Ironically, these categories of hybrid funds saw tepid net inflows in the month of July 2024. This price impact was visible in select hybrid funds where the impact of equity was the highest.
• Out of the 8 categories of hybrid & solutions funds, 7 categories saw positive contribution from price accretion dominance and only 1 categories of funds saw negative contribution coming. Arbitrage funds seeing negative contribution is understandable as it is a short term treasury fund and hence behaves more like a debt fund in terms of returns.

If you leave out the arbitrage funds at the bottom, 5 out of the remaining 7 categories of hybrid funds have seen more than 80% contribution coming from price accretion.

AUM  ACCRETION STORY OF PASSIVE / INDX FUNDS

Index and other passive funds in India includes equity and debt index funds as well as other passive fund categories like gold funds, silver funds, and fund of funds. These index funds are the ones benchmarked to the equity and debt market indices. Most of these passive funds are unique in the sense that they do not attempt to beat the index and create alpha but are happy with tracking the index and reducing the tracking error.

Index and Passive Funds	Net Inflow in the Fund	AUM Closing Value	AUM Accretion	Price Accretion	Price Move Dominance
Index & Other ETFs	5,787.28	7,77,300.88	32,715.88	26,928.60	82.31%
FOFs investing overseas	-366.49	25,179.63	-707.74	-341.25	48.22%
Index Funds	8,019.70	2,58,148.50	14,666.54	6,646.84	45.32%
GOLD ETF	1,337.35	34,455.14	99.40	-1,237.94	-1245.38%
Grand Total	14,777.84	10,95,084.15	46,774.08	31,996.25	68.41%

Data source: AMFI (absolute figures are ₹ in Crore)

The table above breaks up the AUM accretion of each category of passive / index funds in July 2024 into the contributions of net flows and price impact. The funds have been ranked based on the dominance of the price impact on the AUM accretion on each category and overall. Here are some key takeaways.

• Overall, the net accretion in the AUM of index / passive funds in July 2024 was to the tune of ₹46,774 Crore. This was composed of ₹14,778 Crore of fresh net inflows into index / passive funds while the balance ₹31,996 Crore came from price accretion in the equity component of these passive / index funds. In short the contribution of price accretion was 68.41% in the AUM accretion in July 2024 while net inflows into index / passive funds contributed the balance 31.59%.
• Let us look at the categories of index passive funds with the price accretion dominance. Index and other ETFs (exchange traded funds) saw the maximum contribution coming from price accretion in the overall AUM accretion. Ironically, that was the only category with more than 80% contribution of fresh price appreciation in July 2024. This price impact was visible in three of the categories other than gold funds. In the case of gold funds, the net flows were positive but the price impact was negative on account of the fall in the price of gold.
• Out of the 4 categories of debt funds, 3 categories saw positive contribution from price accretion dominance and only 1 category of funds saw negative contribution coming.

If you leave out the gold funds at the bottom, the other categories of passive index funds have seen strong contribution from the price factor. That is on the back of index accretion in case of equity index funds and the rate cut expectations in case of debt index funds.

To sum up overall, active equity funds saw the maximum impact of price accretion on overall AUM accretion in July 2024. This was followed by passive / index funds, hybrid / solutions funds, and active debt funds in that order!