In early 2008, the mutual fund industry grew at a similar pace
as that of the broader market, attracting investors to invest in both
the equity, as well as debts funds. However, with the downslide in
equity markets, the mutual fund industry also started witnessing
outflows. The outflows were especially significant from the equity funds.
Since October 2008, this category has continuously witnessed
redemptions on account of negative performance of the underlying asset
classes. Consider this, in January 2008, the net inflows (total purchase
less total redemptions) into the equity funds were to the tune of
Rs. 12,717 cr, which declined to an outflow of Rs. 136 cr in April
2009 (Refer to Graph 2). These redemption pressures have put
great constrains on the mutual fund managers.
The mutual fund industry, as well as the equity funds
categories, have witnessed a fall in their average Assets Under
Management (AUM) during the same period. Initially, this fall was attributed
to the fall in the value of holdings. Later on, the industry has also
been witnessing redemption pressures. In the equity funds category,
the AUM as on April 2009 was Rs. 1.08 lakh cr, which is 36% lower
than that in the same month in 2008.
On the returns front, in the period from January 2008 to April
2009, equity funds have delivered average absolute returns of negative
51%, which is similar to that of the BSE 200 index (benchmark for most of the diversified
funds). Among the equity diversified category, the top
10% of the funds averaged negative 37% returns,
which is far better compared to the negative return of
45% of the frontline index (sensex). |
