AUM Accretion September 2024 – Net flows versus Price Spike

14 Oct 2024 , 11:53 AM

AUM ACCRETION – BREAKING IT UP

We all know that AMFI reports net assets under management (AUM) each month for mutual funds overall, and across each class of funds (equity, debt, hybrid, and passives). To understand what triggers AUM shifts, we need to break up the AUM accretion category-wise. Once that is done, we further need to break up the AUM accretion into net inflows and price accretion; since both can lead to a change in AUM. That allows us to see the extent of price dominance, or otherwise, in the AUM shift of the fund for a specific month. Here we look at the AUM shifts for the month of September 2024 over August 2024 and check out what were the triggers for the AUM shift. This also measures the sustainability of AUM accretion. That is because as long as the AUM accretion comes from lumpsum investments, SIP investments and new fund offerings (NFOs); it is sustainable. However, accretion in AUM, only led by price appreciation is not sustainable as it can reverse along with the prices. Let us start with the macro story of September first.

AUM ACCRETION –SEPTEMBER 2024 MACRO STORY

Between August 2024 and September 2024, the net AUM of all open ended funds (we ignore closed-ended funds) went up from ₹66.43 Trillion to ₹66.82 Trillion. That is an actual AUM accretion of ₹38,748 Crore on a MOM basis. However, the month of September 2024 saw overall net outflows of ₹(71,027) Crore. This effectively means that the impact of price appreciation on AUM in September 2024 was to the tune of ₹1,09,775 Crore. In short, the impact of price appreciation in September is nearly 3 times the impact of overall AUM accretion. This is not exactly a sustainable scenario and can only continue as long as the bullish sentiments in the markets sustain. That is something the markets need to be eminently cautious about. Let us now turn to the granular story of AUM accretion and start with the break-up of AUM accretion of debt / income funds.

AUM ACCRETION OF ACTIVE DEBT FUNDS – SEPTEMBER 2024

Active debt funds in India is a rather wide classification of funds investing actively in debt. It has funds at the longer end of the yield curve like the 10-Year G-Sec funds and gilt funds; as well as funds at the much shorter end of the yield curve like liquid funds and money market funds. That is not all. There are funds that play on credit ratings like the credit risk funds in search of higher returns, in contrast to Gilt funds, which are free of credit risk. This category also includes debt funds that carry fixed rate of returns and also debt funds that carry floating rates returns. In addition, there are also debt funds that are rule-based as well as debt funds where allocations are based on the discretion of the fund manager. This list excludes debt index funds and ETFs; which are included under the passive funds category. Here is a quick look at the break-up of the AUM accretion of debt funds in Sep-24.

Active Debt Market Funds	Net Inflow in the Fund	AUM Closing Value	AUM Accretion	Price Accretion	Price Move Dominance
Dynamic Bond Fund	116.49	34,512.12	547.62	431.14	78.73%
Gilt Fund with 10-Y CONS-DUR	31.09	4,672.99	94.53	63.43	67.11%
Low Duration Fund	679.01	1,06,572.00	1,337.44	658.43	49.23%
Medium to Long Duration Fund	161.78	11,554.71	301.05	139.27	46.26%
Medium Duration Fund	305.40	25,602.02	520.37	214.97	41.31%
Short Duration Fund	1,435.05	1,13,068.18	2,328.14	893.09	38.36%
Corporate Bond Fund	5,039.07	1,62,570.27	6,488.92	1,449.84	22.34%
Gilt Fund	2,317.06	38,409.40	2,858.43	541.37	18.94%
Long Duration Fund	1,489.64	18,276.31	1,782.28	292.64	16.42%
Overnight Fund	-19,362.65	67,274.59	-18,825.67	536.98	-2.85%
Liquid Fund	-72,665.97	4,40,332.54	-69,832.83	2,833.14	-4.06%
Money Market Fund	-23,420.84	2,23,990.04	-21,855.87	1,564.97	-7.16%
Ultra Short Duration Fund	-6,281.54	1,00,179.47	-5,632.43	649.11	-11.52%
Floater Fund	-1,216.02	52,141.38	-887.51	328.51	-37.01%
Banking and PSU Fund	-1,977.95	76,726.43	-1,392.21	585.74	-42.07%
Credit Risk Fund	-483.60	21,304.87	-295.45	188.15	-63.68%
Grand Total	-1,13,833.95	14,97,187.33	-1,02,463.18	11,370.77	-11.10%

Data source: AMFI (absolute figures are ₹ in Crore) The table above breaks up the AUM accretion of each category of debt fund for September 2024 into the contributions of net flows and the 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 depletion in AUM of debt mutual funds in September 2024 stood at ₹(1,02,463) Crore. This was composed of ₹(1,13,834) Crore of net outflows from debt funds on account of the quarterly treasury redemptions. However, price appreciation in debt funds was positive to the tune of ₹11,371 Crore, almost the same as last month. In short the contribution of price accretion was marginal in September; with the treasury outflows from short-end funds being largely driven by corporate redemptions to meet the advance tax liabilities for the quarter.
• Let us look at the categories of debt funds with the price accretion dominance. Dynamic Bond Funds, Gilt Funds with 10 years maturity, low duration funds, and medium to long duration funds saw the maximum contribution coming from price accretion in the overall AUM accretion. That shows gains emanating from lower yield expectations.
• Out of the 16 categories of debt funds, 9 categories saw positive AUM accretion and net inflows while the remaining 7 categories saw AUM depletion and net outflows.

Out of the 16 funds, 5 funds saw more than 40% contribution from price appreciation, while 9 categories of debt funds saw double digit impact of price movement.

AUM ACCRETION OF ACTIVE EQUITY FUNDS – SEPTEMBER 2024

Active equity funds in India covers a gamut of thematic, sectoral, and diversified funds. Nowadays, it is thematic funds that have seen their AUMs surge. Today, the flow accretion has taken sectoral funds to the top of the flows list, while they have among the lowest contribution from price increases. This list excludes equity index funds and ETFs, which are included under passive funds.

Active Equity Market Funds	Net Inflow in the Fund	AUM Closing Value	AUM Accretion	Price Accretion	Price Move Dominance
Focused Fund	-272.78	1,54,190.98	3,751.47	4,024.26	107.27%
ELSS	-348.80	2,57,824.29	5,435.49	5,784.30	106.42%
Large Cap Fund	1,769.42	3,79,010.08	10,608.87	8,839.45	83.32%
Flexi Cap Fund	3,214.57	4,44,375.43	15,063.92	11,849.35	78.66%
Mid Cap Fund	3,130.42	3,97,009.72	12,351.55	9,221.12	74.66%
Small Cap Fund	3,070.84	3,28,837.50	8,869.93	5,799.09	65.38%
Value Fund/Contra Fund	1,964.35	1,95,613.58	5,139.76	3,175.41	61.78%
Large & Mid Cap Fund	3,598.09	2,72,809.07	9,000.46	5,402.38	60.02%
Multi Cap Fund	3,508.88	1,80,180.67	7,077.65	3,568.77	50.42%
Sectoral/Thematic Funds	13,254.63	4,67,187.92	22,244.02	8,989.39	40.41%
Dividend Yield Fund	1,529.63	33,439.37	1,922.87	393.24	20.45%
Grand Total	34,419.26	31,10,478.62	1,01,465.99	67,046.74	66.08%

Data source: AMFI (absolute figures are ₹ in Crore) The table breaks up the AUM accretion of each category of equity funds in September 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. Being equity funds, the price impact is bound to dominate. Here are some key takeaways.

• Overall, the net accretion in the AUM of equity mutual funds in September 2024 was dominated by the price appreciation factor. The total net AUM accretion MOM was to the tune of ₹1,01,466 Crore. This was composed of ₹34,219 Crore of fresh net inflows into equity funds while the balance ₹67,047 Crore came from price accretion. In short the contribution of price accretion was a healthy 66.08%. You can also say that price dominance contributed twice as much as net inflows to the overall AUM accretion of active equity funds in September 2024.
• 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 flows in the month of September 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 several micro indices. Dividend yield funds and sectoral / thematic funds saw the lowest contribution from price accretion; in the latter case due to very robust inflows; but also, because the thematic funds are too diverse in their mix.
• Out of the 11 categories of equity funds, all the 11 categories saw positive contribution from price accretion dominance with two categories offering over 100% contribution and 9 categories of mutual funds having a price accretion share of over 50%.

It looks like equity funds continue to depend on market support to grow AUM on a consistent basis. However, active funds have a lower dependence on price dominance as compared to passive fund, which we shall see later.

AUM ACCRETION IN HYBRID FUNDS – SEPTEMBER 2024

Hybrid funds in India offer a rather wide array of funds combining equity and debt in varying proportions. Some of them even use derivatives to replicate debt returns via arbitrage. Here is a quick dekko at price move dominance in the case of hybrid funds.

Hybrid and Retirement Funds	Net Inflow in the Fund	AUM Closing Value	AUM Accretion	Price Accretion	Price Move Dominance
Conservative Hybrid Fund	-126.47	28,574.79	189.05	315.52	166.90%
Aggressive Hybrid Fund	516.19	2,29,296.60	4,517.47	4,001.29	88.57%
Children’s Fund	96.30	22,891.57	501.44	405.14	80.80%
Retirement Fund	136.21	31,047.16	652.32	516.11	79.12%
Dynamic Asset Allocation / BAF	1,703.55	2,89,102.26	3,576.07	1,872.52	52.36%
Multi Asset Allocation Fund	4,070.37	98,515.76	5,840.18	1,769.80	30.30%
Equity Savings Fund	2,269.34	39,546.40	2,556.07	286.73	11.22%
Arbitrage Fund	-3,531.93	1,89,863.15	-2,845.57	686.36	-24.12%
Grand Total	5,133.57	9,28,837.69	14,987.04	9,853.47	65.75%

Data source: AMFI (absolute figures are ₹ in Crore) The table above breaks up the AUM accretion of each category of hybrid funds in August 2024 into the contributions of net flows and price impact. For simplicity, we have clubbed solutions funds also under hybrid funds, due to their structural similarity. The funds have been ranked based on the dominance of the price impact on the AUM accretion on each category and overall.

• Overall, the net accretion in the AUM of hybrid / solution funds in September 2024 was to the tune of ₹14,987 Crore. This was composed of ₹5,134 Crore of fresh net inflows into hybrid funds while the balance ₹9,853 Crore was through price appreciation, largely on the equity component of these hybrid funds. In short the contribution of price accretion was 65.75% in the AUM accretion in September 2024; which is almost at par with the kind of price dominance that active equity funds have seen. That is because most hybrid funds use equity dominance for tax purposes.
• Let us look at the categories of hybrid funds with the highest price accretion dominance. Conservative hybrid funds, aggressive hybrid, Children’s funds, and Retirement Funds saw the maximum contribution coming from price accretion in the overall AUM accretion; at over 75% in each of these cases. Ironically, these categories of hybrid funds had seen tepid net inflows in September 2024. This price impact was pronounced in select hybrid funds where the equity exposure was the highest.
• Out of the 8 categories of hybrid & solutions funds, 7 categories saw positive contribution from price accretion dominance and only 1 category (arbitrage funds) saw negative contribution coming. Equity Savings funds also saw subdued price contribution, and that could be more due to the impact of derivatives in September 2024.

If you leave out the arbitrage funds at the bottom, the remaining hybrid fund have all seen positive contribution from price dominance. In fact, 5 of the 8 hybrid categories saw price move dominance of over 50%.

AUM ACCRETION IN PASSIVE FUNDS – SEPTEMBER 2024

Passive funds in India broadly comprise of index funds, index ETFs, global FOFs and commodity indexed ETFs. These index funds are the ones benchmarked to the equity and debt market indices. Passive funds do not attempt to beat the index and create alpha; but are content with mirroring the index and reducing tracking error.

Index and Passive Funds	Net Inflow in the Fund	AUM Closing Value	AUM Accretion	Price Accretion	Price Move Dominance
Fund of funds investing overseas	-320.23	25,866.41	480.42	800.64	166.66%
Other ETFs	381.04	8,10,272.78	15,927.55	15,546.51	97.61%
Index Funds	1,960.29	2,69,691.23	5,917.13	3,956.84	66.87%
GOLD ETF	1,232.99	39,823.50	2,433.46	1,200.47	49.33%
Grand Total	3,254.09	11,45,653.92	24,758.56	21,504.47	86.86%

Data source: AMFI (absolute figures are ₹ in Crore) The table above breaks up the AUM accretion of each category of passive funds and ETFs in August 2024 into the respective 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 September 2024 was to the tune of ₹24,759 Crore. This was composed of ₹3,254 Crore of fresh net inflows into index / passive funds while the balance ₹21,505 Crore came from price accretion in equity and debt component of these funds. In short the contribution of price accretion was 86.86% in September 2024. This not only betters the previous two months, but also betters all other fund category classes in September 2024, including active equity funds.
• Which categories of passive funds showed maximum price accretion dominance. Interestingly, the fund of funds (FOF) investing overseas saw the maximum contribution of 166.66% from price appreciation. This was due to US markets at all-time highs and the Chinese markets recovering sharply on stimulus news. Ironically, that was the only category with more than 100% contribution of price appreciation in September 2024 among passive funds. However, the contribution of price appreciation was over 49% even in the worst case scenario. This time, price appreciation was visible across equity index funds, debt index funds, global funds, and even gold funds; which made the cut.
• All the 4 categories of passive / index funds saw positive contribution from price accretion dominance with even the lowest contribution being above 49%.

In September 2024, while equity indices and bond indices gained from RBI rate cut expectations, post the Fed cutting by 50 bps. Global precious metals and global markets are also in the midst of a rally, which completes the full circle. Not surprisingly, the price appreciation impact on overall AUM accretion in September 2024 was sharply higher than in August 2024. One reason could also be that active debt funds saw net outflows; while net inflow into hybrid funds and passive funds were relatively tepid!