Equity AUM Is Reaching At its All-Time High! Where Are You Investing?
With the increasing awareness among investors regarding investments in mutual funds, the industry is reaching new heights every day. After demonetization, people are relying more on these schemes rather than any other saving instruments.
This has all helped the mutual fund houses because the bank interest rates slashed, but the returns of schemes have increased in the past few years. In this phase, new growth has been observed in the equity funds, where AUM hits its all-time high with 5.4% in May 2018 of India’s total market cap.
Association of Mutual Funds of India’s (AMFI) data shows that the top 20 fund houses of the country are managing the direct equity AUM of Rs 1.45 lakh Cr as on April 2018 including, pure equity funds, balanced funds, and equity-linked saving schemes. The total market cap of the equity funds has increased by 0.8% in the last one year and grown up by 0.2% in the previous one month only. All these ratios are showing that both the retail as well as high net worth individual investors are participating in the market with complete enthusiasm.
Major Fund Houses with Highest Share:
The significant portion of the equity assets is coming from the top 30 cities. This share has been distributed in various fund houses, out of which HDFC is sharing the highest direct equity AUM. The fund has been managing Rs 23,900 Cr as on April 30, 2018, which has increased over by 61% from the last year AUM of Rs 14,900 Cr as on April 30, 2017.
The top fund house of India, ICICI Prudential Mutual Fund followed the HDFC Mutual Fund and bagged the second position. With the total growth of 64%, the direct equity AUM of the fund house is Rs 21,700 Cr as on April 30, 2018 as compared to Rs 13,200 Cr as on April 30, 2018.
L&T Mutual Fund has shown the highest increase concerning percentage. The fund house has witnessed the rise of 240% in direct equity AUM with a difference of Rs 2946.24 Cr in April 2018, than that of in April 2017.
Aditya Birla Sun Life Mutual Fund is at the third spot, which has seen the rise of 74% by Rs 6778.06 Cr to Rs 15960 Cr in April 2018.
Increase in the Market-Cap:
As per the financial researchers of MySIPonline, the market capitalization of all the companies listed on the BSE has been grown to 18.25% in April 2018. This ratio has been consistently ruling above 5% from November 2017 which was floating at 4% mark for about 18 months since September 2015.
Will it Bring in Some Changes for Investors? What Should You Do?
Well, assets size of any fund is profoundly affected by supply, demand, and market returns. However, it's also a reality that the fund’s size and its performance do not have any relationship. It is usually recommended to investors to opt for schemes with assets under management approximately the same as its category’s average. This ensures that the fund is neither over-diversified nor too concentrated. While a vast portfolio may dilute a fund’s returns, holding just a handful stocks is likely to make it a relatively risky proposition.
If the fund size has increased recently, then it will bring in some obvious cost benefits. As a fund grows in size, the fixed costs relating to it become a smaller proportion of the expenses, which further improves the efficiency of the fund. Also, a large fund denotes increased revenue for the fund house as it brings in more management fees. It will allow the skillful equity fund managers to exhibit their expertise effectively.
Last But Not Least
Considering the advice of our experts, the AUM is hardly an important factor to consider while fund selection. What is more important is its consistent performance across market cycles and the ability of the fund manager to deliver good returns despite varying AUMs.
For more such informative write-ups, stay tuned with us. You may also connect with our experts for seeking information regarding any mutual fund investment via call or email.
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