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Biggest mutual fund AUM growth stories of last 4 years

18 Apr 2024 , 11:48 AM

WHY THE FOCUS ON BIG STORIES OF LAST 4 YEARS?

As fiscal year FY24 comes to an end, it is time to look back at how the mutual funds have grown over the last few years. We will consider the bottom of COVID 2020 as the base and, considering that the COVID bottom was hit on March 20, 2020, this marks the completion of 4 full years since the conclusion of the pandemic.  There have been scores of reports in the recent past that the post-COVID period was decisive for the growth of the mutual funds in India. To a largely extent, that is already evident in the way the number of folios have grown and the way SIPs have become the core of retail investment portfolios. After the COVID shock of 2020, people are increasingly realizing the importance of being invested in equities for the long term. That is not just an India trend, but a global trend. But have mutual funds grown since pandemic purely due to the market appreciation or is it due to fresh flows too? In reality,  it is a mix of both, as we shall see from the granular break-up of AUM growth.

MACRO STORY – HOW OVERALL AUM GREW SINCE THE PANDEMIC

Let us start with the macro picture. We have only looked at open ended funds, since closed ended funds now constitute less than 0.35% of the AUM. Here is a picture of how the net AUM has evolved overall over the last 4 years along with the CAGR growth in 4 years.

All Open Ended Funds AUM Mar-24 AUM Mar-23 AUM Mar-22 AUM Mar-21 AUM Mar-20 CAGR
Open-Ended Funds AUM Total 53,12,736 39,07,838 36,95,800 29,96,553 20,50,734 26.87%

Data Source: AMFI (AUM figures are ₹ in Crore)

What are the quick takeaways from the overall AUM numbers? Obviously, this is a very macro picture of open ended funds and may only tell you so much. However, 26.87% growth in AUM across the board is phenomenal in the 4 years post the pandemic. Remember, this CAGR growth in this period, so effectively over the last 4 years, the overall AUM of mutual funds in India has grown 2.59 times. This has been supported by a mix of stock market index appreciation as well as robust inflows via SIPs and NFOs in the Indian markets. The story becomes a lot clearer when we look ag the category-wise picture.

ACTIVE DEBT FUNDS – STORY OF CAGR GROWTH SINCE COVID-19

Here is a picture of how the net AUM of active debt / income funds have evolved overall over the last 4 years along with the CAGR growth in this period.

Active Debt Funds AUM Mar-24 AUM Mar-23 AUM Mar-22 AUM Mar-21 AUM Mar-20 CAGR
Long Duration Fund 12,769 8,798 2,523 2,578 1,670 66.30%
Gilt Funds (10-Year-Duration) 4,742 3,760 1,261 1,500 941 49.81%
Gilt Fund 27,268 21,458 15,222 16,246 9,285 30.91%
Money Market Fund 1,48,893 1,08,468 1,14,219 89,758 57,017 27.12%
Corporate Bond Fund 1,47,361 1,30,767 1,30,073 1,60,125 81,730 15.88%
Dynamic Bond Fund 31,617 29,287 25,312 27,552 18,116 14.94%
Floater Fund 51,469 52,989 80,632 65,436 32,490 12.19%
Ultra Short Duration Fund 83,561 79,123 87,948 91,998 72,226 3.71%
Banking and PSU Fund 80,891 80,517 93,383 1,19,559 72,476 2.78%
Low Duration Fund 90,212 86,693 1,12,745 1,29,767 81,371 2.61%
Liquid Fund 3,63,510 3,32,498 3,45,903 3,36,598 3,34,725 2.08%
Medium to Long Duration Fund 10,497 8,895 10,055 10,390 9,805 1.72%
Short Duration Fund 99,004 91,239 1,15,856 1,45,662 93,444 1.46%
Medium Duration Fund 25,976 27,091 32,983 31,740 28,290 -2.11%
Overnight Fund 61,314 95,626 1,03,071 71,009 80,174 -6.49%
Credit Risk Fund 23,141 24,776 27,772 28,308 55,381 -19.60%
Active Debt Funds AUM Total 12,62,224 11,81,982 12,98,961 13,28,226 10,29,142 5.24%

Data Source: AMFI (AUM figures are ₹ in Crore)

The CAGR growth of debt / income funds since the pandemic has been just about 5.24%. That is very tepid growth. However, that is not surprising considering that with the sharp fall in rates, most of the funds automatically gravitated towards equities. Here are some of the key takeaways on the debt fund growth over the last 4 years.

  • Out of the 16 fund categories in the active debt fund category, 13 have shown positive CAGR growth in the last 5 years while only 3 have shown negative CAGR growth, or a sustained compression in AUM.
  • Credit risk funds saw net AUMs more than halving in the 4 years post COVID, which is not surprising as it also coincided with the fiasco of Templeton Mutual Fund, which had to call a freeze on some of its high risk debt funds to prevent a run of investors. The other fund categories that also saw sustained compression in AUMs were overnight funds and medium duration funds. This could be due to asset quality concerns in many of such funds where there has been substantial fund manager discretion in allocation.
  • The debt fund categories that saw meaningful CAGR growth in the last 4 years include long duration funds, gilt funds with 10 year maturity, and gilt funds. While this can be attributed to bets on falling rates, these funds saw AUM growth on a small base. The more interesting AUM growth was in the corporate bond funds AUM, which grew at a CAGR of 15.88%, as debt fund investors bargained for higher returns.

Debt funds have not had the greatest of phases, but some of them did buck the trend.

ACTIVE EQUITY FUNDS – THE BIG GROWTH STORY POST-COVID

Here is a picture of how the net AUM of active equity funds have evolved overall over the last 4 years along with the CAGR growth in this period.

Active Equity Funds AUM Mar-24 AUM Mar-23 AUM Mar-22 AUM Mar-21 AUM Mar-20 CAGR
Multi Cap Fund 1,24,682 67,338 54,932 19,891 12,685 77.06%
Dividend Yield Fund 23,915 13,994 9,819 6,735 3,282 64.30%
Small Cap Fund 2,43,368 1,33,384 1,06,857 69,799 35,832 61.44%
Sectoral/Thematic Funds 2,97,358 1,72,819 1,48,830 98,080 49,844 56.28%
Large & Mid Cap Fund 2,05,737 1,27,842 1,10,143 76,428 42,972 47.92%
Mid Cap Fund 2,96,986 1,83,256 1,59,928 1,16,403 65,805 45.75%
Value Fund/Contra Fund 1,49,099 90,584 78,774 61,150 39,460 39.42%
Flexi Cap Fund 3,50,186 2,41,683 2,25,430 1,58,725 1,01,223 36.38%
Focused Fund 1,29,704 98,673 96,710 68,603 39,072 34.98%
ELSS 2,13,760 1,51,751 1,47,841 1,25,228 74,791 30.02%
Large Cap Fund 3,14,155 2,35,760 2,26,191 1,78,324 1,13,541 28.97%
Active Equity Funds AUM Total 23,48,949 15,17,082 13,65,456 9,79,367 5,78,508 41.95%

Data Source: AMFI (AUM figures are ₹ in Crore)

The CAGR growth in equity fund AUM over the last 4 years has been an impressive 41.95%, which is a mix of flows and capital appreciation post the pandemic. Equity funds AUM as of March 2024 is 4.06 times the AUM as of March 2020. There is one small clarification here. The separation of multi-cap funds and flexi-cap funds only happened in FY21. To make them comparable, we have applied the same distribution ratio to split the overall corpus between multi-cap funds and flexi-cap funds for March 2020. Here are some of the key takeaways.

  • At a macro level, all the 11 categories of active equity funds saw smart growth with the lowest CAGR growth being 28.97%. In most cases, the difference in growth has been less about capital appreciation and more about flows, so the leaders are the ones where equity fund flows have gravitated in the last 4 years.
  • In terms of CAGR gainers, multi-cap funds have picked up tremendous traction in last one year and that has come at the cost of flexi-cap funds. Investors have preferred funds that offer less discretion to the fund manager, especially when it comes to asset allocation funds. But, the big shift is towards is alpha hunting with small cap funds, thematic funds, and mid-cap funds cornering most of the flows in last 4 years. Dividend yield fund may be in exception, but that is more due to a low base.
  • In terms of laggards, ELSS fund appear to have lost momentum after the introduction of the new tax regime. Large cap fund, with their high cost structures, are gradually losing their mojo to the passive funds. We will look at that dichotomy more specifically when we look at passive funds.

Overall, the equity fund story has been the story of the post pandemic period. Investors have gravitated towards equity in a big way, and SIPs have been the vehicle of choice.

HYBRID FUNDS – A SURPRISING WINNER POST THE PANDEMIC

Here is a picture of how the net AUM of hybrid funds have evolved over the last 4 years along with the CAGR growth in this period. Hybrids are combinations of asset classes.

Hybrid Funds AUM Mar-24 AUM Mar-23 AUM Mar-22 AUM Mar-21 AUM Mar-20 CAGR
Multi Asset Allocation Fund 67,280 26,591 19,582 14,795 9,439 63.39%
Dynamic Asset Allocation/BAF 2,48,798 1,91,810 1,78,863 1,07,883 77,091 34.03%
Retirement Fund 25,280 17,993 16,406 13,569 8,507 31.29%
Arbitrage Fund 1,53,009 67,435 95,217 74,530 52,210 30.84%
Childrens Fund 18,967 14,340 13,131 10,808 7,192 27.43%
Equity Savings Fund 29,567 16,012 16,664 9,759 11,229 27.39%
Conservative Hybrid Fund 26,871 23,170 21,074 12,916 11,190 24.49%
Balanced Hybrid Fund 1,97,197 1,53,899 1,48,519 1,23,075 1,00,990 18.21%
Hybrid Funds AUM Total 7,66,969 5,11,250 5,09,455 3,67,334 2,77,849 28.90%

Data Source: AMFI (AUM figures are ₹ in Crore)

At a macro level, the AUM of hybrid funds have grown at an impressive 28.90% over the last 4 years, with all the 8 categories of hybrid / solution funds showing positive CAGR growth. The AUM of hybrid funds as of March 2024 is 2.76 times the AUM as of March 2020. It has been a surprising gainer post pandemic, and we shall look at the specific reasons. For starters, we have included solution funds also under the category of hybrid funds, due to the similarity of their structure and strategy. Here are some of the key takeaways.

  • All the 8 categories of hybrid / solution funds saw positive growth in AUM in the last 4 years with the lowest AUM growth being an impressive 18.21% CAGR over the last 4 years. In hybrid funds, the core stories have been asset allocation and fund manager discretion that have driven the growth in the last 4 years.
  • The best growth came from multi-asst allocation funds and BAFs. While both these categories got a boost from NFOs, they also gained from investors gravitating towards asset allocation funds to get a better pan-asset class diversification. Arbitrage funds have grown at an impressive 30.84% CAGR in last 4 years, but that is more due to HNI treasury money gravitating from liquid funds to arbitrage funds. After all, apart from the favourable tax treatment, arbitrage fund returns also gained from market volatility.
  • Interestingly, the laggards were the traditional hybrid funds like the conservative allocation funds and the balanced allocation funds. Investors are looking at active asset allocation from fund managers, which his why the categories like BAFs, multi asset allocation funds and equity savings have seen good traction. Investors are happy if fund managers can give a return booster while also reducing their overall risk.

Hybrid funds emerged as a smart alternative from an asset allocation perspective. Apart from equity and debt, allocation funds have emerged as a strong class of alternate funds.

PASSIVE FUNDS – THE REAL WINNER POST PANDEMIC

Here is a picture of how the net AUM of hybrid funds have evolved over the last 4 years along with the CAGR growth in this period. Hybrids are combinations of asset classes.

Passive Funds AUM Mar-24 AUM Mar-23 AUM Mar-22 AUM Mar-21 AUM Mar-20 CAGR
Index Funds 2,13,657 1,67,517 68,676 19,164 8,089 126.70%
FOF Overseas 25,713 22,991 22,609 12,408 2,734 75.12%
Other ETFs 6,64,000 4,84,277 4,11,362 2,75,931 1,46,463 45.92%
GOLD ETF 31,224 22,737 19,281 14,123 7,949 40.78%
Passive Funds AUM Total 9,34,595 6,97,522 5,21,928 3,21,626 1,65,235 54.22%

Data Source: AMFI (AUM figures are ₹ in Crore)

As a fund category, the passive funds showed 54.22% CAGR growth in AUM post the pandemic. What has supported the rapid growth in index funds and index ETFs. As fund managers faced the twin challenges of volatility and kurtosis, investors realized that passive funds offered a delectable alternative. After all, when the Sensex has given 17% TRI returns over the last 45 years on a CAGR basis, it is tough to go wrong on any of the frontline indices. Add to it, there is the sharply lower cost, that itself works as a return compounder over a longer time frame. Not surprisingly, it is the passive funds that have emerged as the undisputed star in terms of asset growth post the pandemic!

Related Tags

  • AUM
  • DebtFunds
  • EquityFunds
  • HybridFunds
  • MF SIPs
  • MFs
  • MutualFunds
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