Domestic funds' asset slips more than foreign MFs

Overseas funds' higher exposure to equity boosts AUMs.

Indian mutual fund houses have seen a higher drop in their AUMs this fiscal to date, than the foreign fund houses have, according to data available on the SEBI Web site.

As of December-end 2010, Indian mutual fund houses' average assets under management (AUM) fell by 10.4 per cent while that of foreign fund houses fell by 2.6 per cent. The industry average AUM, which stood at Rs. 6.74 lakh crore, for the same period saw a drop of 9.6 per cent.

Foreign fund houses account for about 11 per cent of the average AUM of the industry, and domestic fund houses 89 per cent. The proportion in terms of number of folios is also the same.

The foreign fund houses' average AUM totalled Rs 72,494.54 crore and that of the Indian fund houses Rs 60,1905.88 crore, both as at December end, 2010.

Of the 43 fund houses, 11 are foreign fund houses.

One reason for the difference in AUM fall between the two categories of fund houses is the liquidity tightness that this fiscal experienced. “Generally, foreign fund houses have more exposure to the equity side of the market than to the liquid side. This is why they saw a lesser drop in their AUMs as the equity markets performed better than the debt and money markets,” said Mr Surajit Misra, Executive Vice-President and National Head-Mutual Funds, Bajaj Capital.

The average AUM of Franklin Templeton - the largest foreign fund house in the country - increased by about 18 per cent for the period April-December, 2010. The AUM of the fund house rose to Rs 39,442.60 crore (as on December 31, 2010), from Rs 33,290.04 crore (March 31, 2010). Fidelity, the second largest foreign fund house, recorded a 15 per cent increase in AUM, which stood at Rs 7,683.91 crore (Rs 8,901.48 crore).

“During 2010, we consciously increased our focus on the fixed income side given the low retail participation in that segment.

As part of this strategy and our conviction about corporate debt, we had pushed two funds that included a new launch focused on accruals,” said Mr Harshendu Bindal, President, Franklin Templeton Investments (India).

Top-5 fund houses

Of the top five Indian fund houses in the country, UTI and ICICI Prudential mutual funds have fallen by 19 per cent each during this fiscal. While Birla Sun Life and Reliance Mutual Fund fell by 7.4 per cent, HDFC MF fell by just one per cent during the same period.

The year 2010 saw Shinsei mutual fund completely exiting the mutual fund business in India and selling it to Daiwa. The joint venture between Sundaram MF and BNP Paribas came to an end, with Sundaram continuing on its own and BNP Paribas taking over Fortis Mutual Fund.

AIG Global Investment Group Mutual Fund, owing to its efforts to cut costs and repay debt, has reportedly sold its Indian mutual fund business to Pinebridge Investments (an erstwhile AIG subsidiary).

Despite the struggling mutual fund industry in India, interest and the potential in the India growth story will keep foreign fund houses wanting to enter the industry. “However, many of these players will need to have a long term outlook given that margins are likely to be under pressure,” said Mr Bindal.

Source: http://www.thehindubusinessline.com/2011/01/26/stories/2011012650661400.htm