Mutual fund assets see record gains in 2021, equity funds garner lion's share

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NEW DELHI: Assets under management (AUM) of the domestic mutual fund industry, excluding fund of funds (FoF), closed at a record Rs 37.73 lakh crore, with equity-oriented funds cornering the lion’s share as opposed to 2020 which had seen sharp inflows into debt-oriended funds, according to Crisil Research.
Mutual funds added Rs 6.70 lakh crore — a record absolute asset gain for any calendar year on record, with the previous peak being Rs 4.80 lakh crore in 2017, followed by Rs 4.5 lakh crore in 2020.
In percentage terms, the industry gained 22% compared with 17% in 2020.
2021 saw investors put a larger amount of their money in equity-oriented mutual funds, drawn by the strong gains in the underlying equity market. Equity mutual funds saw net inflows of Rs 91,000 crore, while passive funds got Rs 1.14 lakh crore and hybrid funds Rs 1.02 lakh crore. Passive funds and hybrid funds benefitted from a spate of new fund offers, at 41 and 8 funds, respectively.
Debt mutual funds, on the other hand, saw net outflow of Rs 35,000 crore in 2021 as investors stayed away from the category amid a fall in returns and as investors waited on the side lines, monitoring probable interest hikes by the Reserve Bank of India, noted the report.
In 2020, open-ended debt-oriented mutual funds saw inflows of Rs 2.01 lakh crore while equity-oriented funds saw net inflows of just Rs 9,100 crore. Hybrid funds also took a beating with an outflow of over Rs 53,000 crore. However, passive funds continued to garner money, amounting Rs 62,000 crore, led by flows from institutional investors such as the Employees’ Provident Fund of India (EPFO).
SIP inflows make new calendar year, monthly records
The industry logged net inflows of Rs 1.14 lakh crore in 2021 through systematic investment plans (SIPs), crossing the Rs 1 lakh crore mark for the first time in any calendar year since AMFI started declaring this data. December 2021 also saw SIP flows come in at their record monthly high of Rs 11,300 crore, after crossing the Rs 11,000-crore mark for the first time in November 2021.
The number of SIP accounts rose to 4.91 crore, accounting for Rs 5.65 lakh crore of the industry’s assets as of December.
ETFs become the largest MF category while liquid funds lose sheen
Benefitting from the strong inflows from the EPFO and other pension trusts, together with new launches and individual investor interest, assets of exchange-traded funds (ETFs) surged to overtake liquid funds as the largest MF category in 2021. ETFs closed 2021 with assets of Rs 3.84 lakh crore compared with Rs 3.61 lakh crore for liquid funds.
Liquid funds lost sheen as their returns dipped in line with low interest rates, making other money market MF categories more attractive for investors with higher risk appetite.
Floating-rate, target maturity and ESG funds gain traction
2021 saw floating-rate debt funds and passively managed debt funds in the form of target maturity funds gain traction within the industry. On the equity front, there was increasing traction in the environmental, social and governance (ESG) space, as the theme of ‘conscious investing’ became popular among investors.

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