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Aditya Birla SL pips Reliance as third-largest mutual fund

Experts say that the quick growth in AAUM usually happens due to corporate inflows into fixed income products like liquid funds

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There has been an important change in the pecking order of the Indian mutual fund industry.

Aditya Birla Sun Life Mutual Fund (ABSL MF) has emerged as the third-largest fund-house with Rs 2.49 lakh crore average assets under management (AAUM), surpassing Reliance's Rs 2.46 lakh crore, as per latest data by asset management companies (AMCs).

There is not much change among the top two fund-houses in terms of AAUM, with ICICI Prudential (Rs 3.06 lakh crore) and HDFC (Rs 3.02 lakh crore) still at the helm.

While ABSL MF (Rs 2.43 lakh crore) had reported marginally higher AAUM than Reliance MF (Rs 2.42 lakh crore) at the end of December 2017 itself, the gap has widened to over Rs 2,200 crore at the end of January 2018.

ABSL MF has a higher proportion of fixed income assets (64.5%) compared to Reliance (58.2%).

Experts say that the quick growth in AAUM usually happens due to corporate inflows into fixed income products like liquid funds. "This will be most likely be due to flows from corporates into liquid funds. Both AMCs (asset management companies) have a good mix of liquid, fixed income and equity assets and we expect them to continue to be strong players with a solid product suite going forward too," said Kaustubh Belapurkar, director, manager - research, Morningstar Investment Adviser.

Corporate or institutional money can be a boon and a bane as well. Unlike retail investors who invest in equity assets and have an average account size of Rs 90,000, corporates bring an average Rs 9.4 crore on the table.

However, corporate money is mostly channelled into debt products, which are less profitable for asset managers when compared to equity products. This is because funds can charge higher expenses for equity products compared to debt schemes.

Reliance MF said that it is more focused on profitability and retail inflows, hinting that it wants to stay away from asset-chase often driven by institutional money.

Sundeep Sikka, ED & CEO, Reliance Nippon Life AMC, told DNA Money, "At Reliance MF, as a listed asset manager, we remain focused on profitability, and hence, on growing retail flows, which are long-term and sticky. Post demonetisation, we've added the highest retail assets i.e., about 15% of the industry pie. This focus has ensured we remain more profitable than other AMCs of similar size."

Experts feel that there is not much difference between the new number three and four fund-houses.

Belapurkar of Morningstar said, "Reliance Nippon Asset Management and Aditya Birla Sun Life Asset Management are both well-established asset managers. They both have a solid product suite and fairly experienced and well-established investment teams in place. Although Reliance AMC recently witnessed the elevation and subsequent exit of Sunil Singhania, their erstwhile CIO-equities, he has been replaced by Manish Gunwani who himself is an accomplished manager, having previously worked with ICICI Prudential AMC as co-CIO - equities."

Industry data shows that for the period April 1, 2017, to January 31, 2018, Reliance MF has beaten ABSL MF in terms of retail inflows.

Reliance MF received Rs 21,383 crore against Aditya Birla SL MF's Rs 15,795 crore. HDFC MF received the maximum of Rs 23,227 crore while ICICI MF garnered Rs 17,379 crore. In terms of institutional flows, HDFC MF got Rs 34,413 crore, followed by ICICI MF Rs 31,190 crore, Birla SL MF Rs 17,228 crore and Reliance MF Rs 5,589 crore.

...& ANALYSIS

  • Experts say that the quick growth in AAUM usually happens due to corporate inflows into fixed income products like liquid funds
     
  • ABSL MF has a higher proportion of fixed income assets (64.5%) compared to Reliance (58.2%)
     
  • Corporate money is mostly channelled into debt products, which are less profitable for asset managers when compared to equity products
     
  • This is because funds can charge higher expenses for equity products compared to debt scheme
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