MFs' AUM jumps as equity funds put up better show

The Indian mutual fund (MF) industry witnessed an increase of 3.3% in its average assets under management (AAUM) to around Rs 6.87-lakh crore by the end of August ’10, from Rs 6.65-lakh crore in July ’10.

In fact, this rise in the AAUM of the industry is amidst concerns of a fall in valuations of the liquid plus (ultra short-term) category of schemes; post-Sebi diktat on new valuation norms for these schemes that came into effect last month.


With new valuation norms requiring ultra short-term plans to value their debt securities with a maturity of more than 91 days to be marked-to-market, there were considerable concerns over the rise in volatility and valuations of these schemes by corporate houses that invest into these schemes.

However, a month down the line, ultra short-term plans have reported an average increase of around 0.43% in their net asset values (NAV) for August ’10, regaining the corporates’ confidence on these schemes.

As such, despite the new valuation norms having hit the floors, many fund managers have begun to realign their portfolios, incorporating debt with less than a 91-day maturity in their ultra short-term plans, in order to tone down the concerns of prospective rise in volatility in the returns of these schemes.

Thus, many prominent debt-dominated fund houses have witnessed a healthy rise in their AAUM for the month. These include Axis, Baroda Pioneer, JM Financial, JP Morgan, L&T and Peerless which have reported a double-digit rise in AAUM.


On the equity front, while most fund houses, dominated by equity assets, have shown an increase in their asset base, the rise can be mainly attributed to an increase in the valuation of equity assets held by these schemes over last month.

While the Sensex and the Nifty have returned around 2% gains over the past one month, the category of diversified equity schemes has clocked in an average of around 3.4% returns for this period.

With the market having gained significantly over the past month, most diversified equity schemes are currently commanding NAVs, almost nearing their 52-week highs. In fact, this marked improvement in the performance of equity mutual fund schemes can be used as a catalyst by fund houses to bring back their lost as well as prospective investors.

As far the AAUM race amongst fund houses is concerned, while Reliance, HDFC and ICICI continue to rule over as the top three fund houses in the country, Birla Sun Life has moved a notch up to bag the fourth position, pushing UTI to number five. Similarly, Franklin Templeton has moved up to grab the sixth position, pushing down SBI Asset Management to a seventh place. Again, DSP Blackrock has also moved a notch up to bag the ninth position pushing LIC down to number 10.