Mutual fund folio growth: how it looked in February 2023?

13 Mar 2023 , 09:52 AM

The AMFI monthly data is normally tracked closely for the category-wise monthly flows and the category-wise AUM. However, an important facet that is often ignored is the growth in folios. Obviously, growth in folios over a month may not be too relevant. However, a longer comparison of folios across fund categories over one year can provide some meaningful insights. Folios are the best barometer of genuine retail spread of fund demand.

MF Folios: Macro picture for February 2023

How does the macro picture of February 2023 mutual fund folios look across open-ended and close-ended funds?

Macro picture	Total Folios Feb-23	Total Folios Feb-22	Folio Growth
Open ended Funds	14,37,31,714	12,54,58,446	14.57%
Closed Ended and Interval Funds	5,19,042	6,71,103	-22.66%
Grand Total	14,42,50,756	12,61,29,549	14.37%

Data Source: AMFI 

At a macro level, the total number of mutual fund folios as of February 2023 stands at 14.43 crore folios. On a yoy basis over February 2022, total folios are up 14.37%. However, the growth has predominantly come from open-ended schemes while close-ended fund folios saw contraction in folios by -22.7%. That is not surprising considering that close-ended folios account for just about 0.36% of the total folios in India. Hence our focus in the remaining analysis would be only on open-ended funds.

How debt fund folios shrank in February 2023?

Debt fund folios came under pressure in February 2023 and the yoy comparison clearly shows that the number of folios has fallen sharply over February 2022.

Debt Fund Schemes	Total Folios Feb-23	Total Folios Feb-22	Folio Growth
Long Duration Fund	40,448	24,765	63.33%
Overnight Fund	6,28,847	5,24,639	19.86%
Ultra-Short Duration Fund	6,42,322	6,23,294	3.05%
Money Market Fund	4,27,033	4,20,963	1.44%
Liquid Fund	17,86,569	17,94,706	-0.45%
Gilt Fund	1,71,155	1,80,217	-5.03%
Dynamic Bond Fund	2,20,176	2,36,499	-6.90%
Gilt Fund with 10-year constant duration	41,728	45,533	-8.36%
Medium to Long Duration Fund	1,06,466	1,16,571	-8.67%
Corporate Bond Fund	6,08,447	6,68,061	-8.92%
Credit Risk Fund	2,47,040	2,73,672	-9.73%
Floater Fund	2,41,031	2,68,620	-10.27%
Low Duration Fund	9,55,013	10,72,630	-10.97%
Medium Duration Fund	2,52,439	2,83,631	-11.00%
Banking and PSU Fund	2,98,204	3,36,854	-11.47%
Short Duration Fund	5,07,846	5,84,821	-13.16%
Total of Debt Funds	71,74,764	74,55,476	-3.77%

Data Source: AMFI

Out of the 16 categories of debt funds available in India as per the AMFI classification, only 4 categories saw expansion in the number of folios, while the remaining 12 fund categories saw contraction in folios. Long duration fund folios grew by a surprising 63.3%, albeit on a small base, but investors are willing to lock themselves into longer durations at higher yields. Overnight funds also attracted a lot of treasury interest. The categories that saw the maximum shrinkage of folios were the discretionary debt fund categories like short duration funds, medium duration funds and low duration funds; apart from banking / PSU funds. Overall, for the debt funds, number of folios yoy shrank by -3.77%.

How equity fund folios expanded in February 2023?

In contrast to debt funds, equity fund folios expanded sharply in February 2023 and the yoy comparison clearly shows that the number of folios grew sharply over February 2022.

Equity Fund Schemes	Total Folios Feb-23	Total Folios Feb-22	Folio Growth
Multi Cap Fund	40,75,693	26,51,738	53.70%
Small Cap Fund	1,06,71,838	76,48,110	39.54%
Mid Cap Fund	1,04,99,596	85,39,929	22.95%
Large & Mid Cap Fund	77,48,622	65,37,977	18.52%
Value Fund/Contra Fund	46,02,572	39,89,205	15.38%
Sectoral/Thematic Funds	1,31,18,546	1,16,82,935	12.29%
ELSS	1,49,68,197	1,35,40,673	10.54%
Flexi Cap Fund	1,26,64,386	1,15,20,089	9.93%
Focused Fund	53,21,370	49,33,396	7.86%
Dividend Yield Fund	5,96,908	5,61,626	6.28%
Large Cap Fund	1,29,63,430	1,23,13,521	5.28%
Total of Equity Funds	9,72,31,158	8,39,19,199	15.86%

Data Source: AMFI

Out of the 11 categories of equity funds available in India as per the AMFI classification, all the 11 categories saw expansion in the number of folios, which is almost like a 100% strike rate. Multi-cap funds topped the folios growth at 53.7%, largely on account of NFOs this year. But what is more defining is the sharp growth in folios in small cap funds and mid-cap funds. In fact, seven out of the eleven categories of equity funds saw expansion in folios of over 10%. This surge in folios in active equity funds can be attributed to a slew of NFOs as well as to the rapid growth in monthly SIP flows. Interestingly, 6 out of 11 equity fund categories have more than 1 crore folios. Overall, for equity funds, number of folios yoy grew by 15.86%.

How hybrid fund folios expanded in February 2023?

Here we have combined hybrid funds with the solution-based funds to give a more complete picture. Folios have grown across categories, with the only exception being arbitrage funds, which saw contraction in folios.

Hybrid Fund Schemes	Total Folios Feb-23	Total Folios Feb-22	Folio Growth
Multi Asset Allocation Fund	10,31,458	7,86,721	31.11%
Dynamic Asset Allocation/BAF	44,45,077	41,72,282	6.54%
Balanced Hybrid / Aggressive Hybrid	53,16,109	50,47,228	5.33%
Conservative Hybrid Fund	5,18,630	5,00,024	3.72%
Equity Savings Fund	3,63,214	3,50,778	3.55%
Retirement Fund	27,53,542	26,79,439	2.77%
Childrens Fund	29,24,260	28,91,704	1.13%
Arbitrage Fund	4,58,666	5,08,631	-9.82%
Total of Hybrid Funds	1,78,10,956	1,69,36,807	5.16%

Data Source: AMFI

Out of the 8 categories of hybrid and solution-based funds available in India as per the AMFI classification, 7 categories saw expansion in the number of folios, with only arbitrage fund seeing contraction in folios. However, that is understandable, since despite being classified as a hybrid scheme, arbitrage funds are a debt treasury product equivalent. Multi-asset allocation funds have been the star among hybrid funds in terms of folio accretion in February 2023 and that can be attributed to the slew of multi-asset allocation NFOs. All the other categories saw single-digit growth in folios, except arbitrage funds that saw -9.82% contraction in folios amidst volatile markets. Overall, for the hybrid and solution funds, number of folios yoy grew at a healthy clip of 5.16%.

Passive funds were the real folio stars of February 2023?

Under passive category, we have included equity and debt related index products, apart from gold funds and Fund of Funds (FOF). The idea is to include fund categories where the intent is not to earn alpha but to just mirror the index or an underlying asset class.

Passive Fund Schemes	Total Folios Feb-23	Total Folios Feb-22	Folio Growth
Index Funds	35,82,822	23,42,493	52.95%
GOLD ETF	46,93,916	37,74,398	24.36%
Other ETFs	1,19,63,506	97,85,826	22.25%
Fund of funds investing overseas	12,74,592	12,44,247	2.44%
Total of Passive Funds	2,15,14,836	1,71,46,964	25.47%

Data Source: AMFI

Like in the case of equity funds, all the 4 categories of passive funds available in India, saw expansion in the number of folios. Passive funds are another segment that has seen a lot of NFOs (new fund offerings) during the year and that has largely contributed to the expansion in folios. Index funds, index ETFs and gold funds have seen a sharp spike in the number folios, although that has not translated into growth in AUM for gold funds. Overall, passive funds have shown the best overall growth in folios on a yoy basis across all categories. 

So, what are the key takeaways from the folios story for February 2023? The investor interest is clearly gravitating away from debt funds; both at the short and the long end of the yield curve. Even within equities, the preference appears to be either for clean alpha funds like sectoral funds, small-cap or mid-cap funds or for zero alpha passive funds. For now, the folio story for February 2023 is that Indian mutual fund investors are surely coming of age and finesse. They are making a very clear choice.