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How Invesco India mutual fund lost the debt game in India

The AMC has seen sustained outflows from debt schemes over the last five years.

June 01, 2022 / 09:58 AM IST
While investigation at Axis Mutual Fund continues amid allegations of wrongdoing, another fund house -- Invesco India Mutual Fund – has also been drawing negative news flow pertaining to mismanagement of investments in certain securities in its debt schemes. The fund house is backed by Invesco, which is a US-based asset management company. It entered the Rs 38 lakh crore-Indian mutual fund industry in 2013 after buying a 49% stake in Religare Mutual Fund. The fund house has been trying to make its presence felt in the highly competitive MF industry, but it has seen sustained outflows from debt schemes over the last five years. Its schemes have also underperformed the industry average.
While investigation at Axis Mutual Fund continues amid allegations of wrongdoing, another fund house -- Invesco India Mutual Fund – has also been drawing negative news flow pertaining to mismanagement of investments in certain securities in its debt schemes. The fund house is backed by Invesco, which is a US-based asset management company. It entered the Rs 38 lakh crore-Indian mutual fund industry in 2013 after buying a 49% stake in Religare Mutual Fund. The fund house has been trying to make its presence felt in the highly competitive MF industry, but it has seen sustained outflows from debt schemes over the last five years. Its schemes have also underperformed the industry average.
A series of defaults and downgrades in bonds has affected many debt schemes of various mutual funds. The closure of schemes by Franklin Templeton AMC also added to investors’ worries. This led to many investors moving away from the riskier credit risk funds. Larger and well-established fund houses started to attract more money in their debt schemes. Vijai Mantri, Co-Founder and Chief Investment Strategist JRL Money says, “Many credit events after default by Infrastructure Leasing & Financial Services Group irked fixed-income investors in the mutual fund industry. Many of them chose to exit schemes where such bonds were held for better alternatives within the mutual fund industry or looked for alternatives. The exit was not a particular fund specific but at industry level phenomenon.”
A series of defaults and downgrades in bonds has affected many debt schemes of various mutual funds. The closure of schemes by Franklin Templeton AMC also added to investors’ worries. This led to many investors moving away from the riskier credit risk funds. Larger and well-established fund houses started to attract more money in their debt schemes. Vijai Mantri, Co-Founder and Chief Investment Strategist JRL Money says, “Many credit events after default by Infrastructure Leasing & Financial Services Group irked fixed-income investors in the mutual fund industry. Many of them chose to exit schemes where such bonds were held for better alternatives within the mutual fund industry or looked for alternatives. The exit was not a particular fund specific but at industry level phenomenon.”
Mutual fund distributors showed preference for debt schemes that had a high-quality portfolio. Target maturity funds investing in government securities, state development loans and bonds issued by public sector undertakings got good response, given the low credit risk, low costs and predictability of returns if the investment was held to maturity.
Mutual fund distributors showed preference for debt schemes that had a high-quality portfolio. Target maturity funds investing in government securities, state development loans and bonds issued by public sector undertakings got a good response, given the low credit risk, low costs and predictability of returns if the investment was held to maturity.
Assets under management of Invesco Mutual Fund’s debt schemes has fallen by 37 percent over the last five years, while the AUM of the mutual fund industry has increased by 21 percent in the same period. At the scheme-level, Invesco India Short Term Fund has seen the sharpest drop in AUM at 83 percent. Joydeep Sen, Corporate Trainer – Debt, says, “Usually the success of a mutual fund house is measured by assets under management. It is an outcome of many factors such as performance of the scheme, costs, branding, sales & marketing push, distribution commissions. No single factor decides the fate of an AMC in isolation.”
Assets under management of Invesco Mutual Fund’s debt schemes have fallen by 37 percent over the last five years, while the AUM of the mutual fund industry has increased by 21 percent in the same period. At the scheme level, Invesco India Short Term Fund has seen the sharpest drop in AUM at 83 percent. Joydeep Sen, Corporate Trainer – Debt, says, “Usually the success of a mutual fund house is measured by assets under management. It is an outcome of many factors such as performance of the scheme, costs, branding, sales and marketing push, and distribution commissions. No single factor decides the fate of an AMC in isolation.”
Many of the debt schemes managed by Invesco India Mutual Fund were inconsistent in delivering outperformance when compared to their respective categories.
Many of the debt schemes managed by Invesco India Mutual Fund were inconsistent in delivering outperformance when compared to their respective categories.
Performance as measured by 3-year rolling return calculated from the last eight years NAV history shows Invesco India Banking & PSU Debt fund gave a compounded annualised average return of 6.6 percent while the category clocked 7.9 percent. Invesco India Corporate Bond fund delivered 7.3 percent CAGR while its category generated 8 percent (Source: ACEMF).
Performance, as measured by three-year rolling return calculated from the last eight years NAV history, shows Invesco India Banking & PSU Debt fund gave a compounded annualised average return of 6.6 percent while the category clocked 7.9 percent. Invesco India Corporate Bond fund delivered 7.3 percent CAGR while its category generated 8 percent (Source: ACEMF).
Equity oriented schemes from Invesco India Mutual Fund have managed to deliver better risk-adjusted returns over the long run. Most of them have either outperformed or matched their returns against their respective category averages and benchmarks over the periods. Moneycontrol has reached out to Invesco India MF for clarification. We will update the story when we get a response.
Equity oriented schemes from Invesco India Mutual Fund have managed to deliver better risk-adjusted returns over the long run. Most of them have either outperformed or matched their returns against their respective category averages and benchmarks over the periods. Moneycontrol has reached out to Invesco India MF for clarification. We will update the story when we get a response.
Dhuraivel Gunasekaran
Nikhil Walavalkar
first published: May 31, 2022 05:52 pm
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