The Hindu Business Line : Select equity funds double asset base on inflows

BL Research Bureau The BSE Sensex is down nearly 14 per cent over one year and the average equity fund has lost 18 per cent of its Net Asset Value. But mutual fund investors have actually been discerning enough to invest in the better performing funds, while pulling out of the poor performers.

Data on assets managed by equity schemes show that equity funds which have handled the market meltdown well over the past year have managed to sharply expand their assets under management.

Twenty four of the 300 open-end equity funds in operation doubled their asset base between August 2007 and August 2008. This includes funds such as Sundaram Select Focus, Kotak Opportunities, Reliance Diversified Power and Reliance Regular Savings Fund, all of which contained declines in their NAV to levels much lower than the Sensex, in a falling stock market. Each of these funds has witnessed substantial fresh inflows over the past one year.

It is clear that investors attached more weight to the performance than the size of the fund, while making investments. Even small-sized funds such as DWS Investment Opportunity have seen inflows on the back of a good show.

Expanded base

Some of the already large funds which expanded their asset base were Reliance Diversified Power, which managed Rs 1,790 crore in August 2007 and expanded to Rs 5,080 crore by August 2008, and DSP ML Top 100 Fund, which saw its assets go up from Rs 469 crore to Rs 1,032 crore. Index funds from UTI Mutual Fund and LIC Mutual Fund have also expanded sharply.

In contrast, investors have also been quick to exit equity funds which saw significant NAV erosion during this period. The asset base for funds such as ABN Amro Future Leaders, DBS Chola Contra, Kotak Lifestyle and ICICI Pru Emerging STAR has shrunk by as much as 55-60 per cent, after the funds suffered negative returns of 24 to 38 per cent over the past year. The assets dwindling much more than the funds’ NAV is suggestive of investors pulling out money from these funds.

Of the entire universe of 300 schemes, 130 funds have managed to add or hold on to their assets managed over the past one year. Shrinkage in assets under management were seen in 169 schemes, or roughly six out of ten.

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