Between September 30 and December 31, 2009, 4.5 lakh folios have been missing in categories that cater to retail investors.
Retail investors are pulling out of mutual fund investments, according to data from the Association of Mutual Funds in India (Amfi).
Between September 30 and December 31, 2009, 4.5 lakh folios have been missing in categories that cater to retail investors.
Equity schemes have seen 2.9 lakh folios vanish, balanced schemes have lost 1.45 lakh and fund of funds schemes have shed 14,096 folios. These are categories of mutual funds in which 93-99% of the folios are contributed by retail investors.
Each investor is allocated a folio number whenever he invests in a mutual fund. This number differs from one fund house to another.
A person investing with the same mutual fund the second time can quote his old folio number and maintain that across all investments with the fund house. As a result, each folio is not equivalent to a fresh investor, but the industry considers five folios equivalent to one investor.
However, debt schemes and exchange traded funds, where corporate participation is higher, have seen additions.
“Corporates and banks invest in mutual fund debt instruments purely for the tax arbitrage,” said a national MF distributor.
About 3.38 lakh folios have been added on the debt side and 26,297 folios in exchange-traded funds. This has meant that the total number of folios has fallen by just 85213 to 4.78 crore.
Experts don’t think outflows from MFs will continue for long.
“People are skeptical about the way stock market moves. They would have cashed-out to keep the gains intact and would get back into the market at lower levels,” said Ravi Trivedy, ED (insurance, pensions, MFs, Financial Services) at KPMG.
But some fund houses say they have not seen investors pulling out. Milind Barwe, managing director at HDFC Mutual Fund, said,
“In fact we have seen that the number of investors is growing.”
Fund houses are blaming the fall in the assets and investors on the new norm where agent commissions is decided and paid by investors directly.
“We are in a different eco-system, where a distributor selling insurance worth Rs 10,000-20,000 makes 17-18% and higher in some cases. Why will they sell mutual funds? What does it give them? At the most 2.5% of the portfolio,” said an industry expert.
Vijai Mantri, CEO of the Indian asset management business of Pramerica Financial of USA, said it will take some time for investors to adjust to the new norms.
“We have been used to doing business for the past 10 years in a particular way. Now, new ways have been prescribed and it will take some time to adjust.”
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