Industry experts attributed the minimal rise in average AUM to outflows from debt funds, particularly credit risk funds
The spill over effect of last year’s credit event has dented the overall average assets under management (AUM) of the mutual fund industry.
In the first six months (April-September) of the current financial year (FY20), the 44-player domestic mutual fund industry posted average AUM growth of just 3.59 percent.
In value terms, as on September-end, the average AUM of the mutual fund industry stood at 25.68 lakh crore as against 24.79 lakh crore in April, as per data available on The Association of Mutual Funds in India website.
Industry experts attributed the minimal rise in average AUM to outflows from debt funds, particularly credit risk funds.
The trouble, which began after multiple defaults by Infrastructure Leasing & Financial Services (IL&FS), came to light in September 2018, affected schemes that held securities issued by it.
Credit-risk funds are debt funds that have at least 65 percent investments in less than AA-rated paper.
These funds suffered as most fund houses had invested in troubled companies such as IL&FS, Dewan Housing Finance Corporation Ltd. (DHFL) and Reliance Home Finance.
Further, the back-to-back downgrade of debt instruments by rating agencies had hurt the performance of credit risk funds, prompting investors to pull out their investments.
In the last six months, investors have pulled out a total of Rs 13,783 crore from credit risk funds.
Other debt categories such as short-term funds and low-duration funds too had witnessed outflows.
Fixed Maturity Plans or popularly known as FMPs which had exposure to risk debt papers issued by group companies of IL&FS, Essel Group and Reliance ADAG also suffered.Fund officials also said that volatility in equity market restricted investors to invest large amount in the equity funds too limiting the growth in the industry AUM.Not sure which mutual funds to buy? Download moneycontrol transact app to get personalised investment recommendations.