Almost Rs3,000 crore more flows out of equity mutual funds in August ‘10; 13-month outflow hits a huge Rs14,450 crore
Moneylife Digital Team 09 September 2010

In August 2010, equity investors pulled out a net Rs2,890 crore from equity mutual funds. Fund companies are staring at a bleak future

According to data provided by the Association of Mutual Funds in India (AMFI), equity schemes have witnessed Rs2,890 crore net outflow or redemption in August 2010, continuing the trend from the last several months. In July 2010, Rs3,400 crore went out of equity funds. Equity linked saving schemes (ELSS) too saw Rs127 crore net outflows. Some say that as the markets reached new highs, equity mutual fund investors have been quick to cash in. A majority of the investors who had put their money at the peak of the markets have started pulling out money from equity schemes, say some sources in the fund industry. But this does not explain why there has been continuous outflow of funds over the last 13 months. Coincidentally, market regulator Securities and Exchange Board of India (SEBI) had banned entry loads on new fund sales and then followed it up with a host of measures to 'tone up' the fund industry.

Canara Robeco Mutual Fund launched its Canara Robeco Large Cap+ Fund in August 2010 which mopped up Rs178 crore. Existing equity schemes mopped up Rs4,750 crore in August. Axis Mutual Fund's Axis Triple Advantage Fund, an open-ended balanced fund, collected Rs428 crore through its new fund offer.

"It has been a continuing trend. As the market has been doing well, many mutual funds have actually performed better than the index. Many people invested when the market was at its peak. All those people have not had any return and have seen their principal in the red for almost three years. Now they are getting an opportunity of getting their principal back. So the level of redemption is high.

Secondly, there are alternate avenues like ULIPs, PMS, real estate and structured products that offer higher revenue to distributors. There has been a trend of funds being pulled out of mutual funds into these products," said a sales head of a private mutual fund.

This, however, does not explain why equity funds have suffered redemption in 10 months out of the past 13 months. Fund companies privately curse the changes SEBI has brought about in the last one year in reducing sales incentives while many distributors have gone out of the fund-selling business altogether, suddenly finding the business unviable.

Comments
KUMAR
1 decade ago
it is not changes brought by SEBI or any other reason except mutual funds are not performing well or their functioning should be investigated. when market is gained more thna double from 8000 to 19000 , mutual funds scheme returns are merely 5-10% only. how come only 5-10% gain when such schemes portfolios are part of same scrips which has gained more than double???
Keshav B Bhat
Replied to KUMAR comment 1 decade ago
This shows that how people talk about the subject they are not familier with. Are you talking about debt funds or Equity Funds.
Whole Equity Based funds are killed by SEBI and the fund sizes are reducing day by day eventhough same funds have given very good returs beating the bench marks. Kindly go through the fund performance reports before writing something please.
Regards,
Keshav B bhat
r
1 decade ago
where are these funds going to...?.. now..?
insurance products...?
Keshav B Bhat
Replied to r comment 1 decade ago
company FDs, Bank FDs and ofcorse some wise oparators like LIMOZENE etc

I think Mr Bhave is the most happy prson now as he and his team has achived their GOAL!
Keshav B Bhat
1 decade ago
Dear Sir,

When the entry load ban was imposed by SEBI, the AMCs were happy and whenever we raised this question in meetings the answer we used to get is SEBI has got power and we can not do avy thing against their orders or we can not be in their bad books by raising this question. Further the advisory system with people charging for consultation is the future so u people get equipped with CFP qualification etc.
Hope atleast now the people in the industry realise the mistakes and come forward with some practical ways to deal with the situation instead of justyfying their misdeeds.

Regards
Keshav B bhat
manoj k bharat
1 decade ago
It was hard luck for small and new investors, who could not get the services of the distributors for applying in mutual funds, as he would not know the basics, regarding which funds to apply, how to apply and where to go to get and submit application. In the process, small and new investor, for whom SEBI was batting immatuirly, was hardest hit in not getting benefitted from the current bull run.

Similarily, it was hard luck for AMC's, which hve to bear the brunt of wrong policies of SEBI, thus resulting in bringing them on the brink of failure in bringing in the culture of equity investments in the country

Government was totally right in keeping ULIP away from SEBI, otherwise it could have ruined that industry as well.

Keshav B Bhat
Replied to manoj k bharat comment 1 decade ago
Dear Sir,
It is not just SEBI to be blamed, even the AMCs thought since they got enough data base of the investors, if the intermediaries are eliminated they will be able to sell the schemes directly.
Further now if a sub broker goes and aproaches any fund house on behalf of any client flately they refuse to help, saying we do not recognise the sub brokers, if you want you can become our broker and we will oblige. But for fund mobilisation they do not see wither the person is aub broker or not even a sub broker/ ARN holder.
As long as this type of attitude remains in the industry no body can do any thing for the small investor or the new investor

regards
Keshav B bhat
Roopsingh Solanki
Replied to Keshav B Bhat comment 1 decade ago
I agree your point that AMCs are reaping what they sow-they never highlighted the point to SEBI that direct investment should not be allowed-is insurance available directly with deduction of its entry load(agent commission)-IRDA has never supported the idea of direct policy selling with low premium-but our ""wise"'AMC bosses tried for welfare of "poor"investors because brokers were "Looting"investors with 2% huge commission-so no doubt AMC are paying the price for their cunningness with IFAs,they should have opposed SEBI unitedly in all nuisance ideas of SEBI and its boss-but instead they have screwed up whole industry-now with markets reaching highest levels -investors are quiting the markets-thanks to SEBI fatwas-
Keshav B Bhat
1 decade ago
it is high-time people start realising the plain truth, No product can be marketed or sold without goeng through marketing process which requires manpower either direct sales force, to who are paid saleries and incentives or intermediaries who are paid commission.
The industry has seen the intermediary comunity is the bestmodel with cost advantage compared to any model.
Regards
Keshav B Bhat
Michael
1 decade ago
Well Mr. Bhave, you were trying to clean the rot from the system...

It appears that your efforts are helping clear out the system itself. You might not have any MF industry left to regulate

Cheers!!!

Throwing out the Baby with the Bath water???

Hemal
Replied to Michael comment 1 decade ago
To me the comments here appear to be of MF agents who lost their business.

Anyways, I am a small investor, a typical salaried guy investing for my retirement. I do my own research on MF and apply to schemes on my own.

My question is why should 2% of my investment be reduced at the onset when I don't want any help of the agents. Before this ban on commission even if I do my own study on MF and apply online or by paper, my investment used to lose 2.25% on day one. I am happy now.
Michael
Replied to Hemal comment 1 decade ago
Friend, If you were doing your "own research" well you would know that there was a DIRECT window for all Mutual Funds with NO ENTRY LOAD and NO COMMISSION payable to anyone many months before SEBI scrapped Entry Load and upfront commissions on all transactions.
Now you will have to be more alert with your "Own research" as if what this articles says continues you may be investing in a fund where many are leaving and that is bound to affect the returns. Happy Investing...
Hemal
Replied to Michael comment 1 decade ago
I agree with you Michael. Sorry the comment was not directed at you but to the article. I did a mistake of doing a reply. Still a newbie to putting comments on a page:)

I have been availing the DIRECT window.
I am in favor of having both the options open for the investors. 1. A direct window with no entry load and no commission. 2. Or a commission based one, a complete ban is not the right approach.

I am also against pocketing of trailing commissions by the MF when a investors has not availed of any agent.
Michael
Replied to Hemal comment 1 decade ago
No problems pal Never fear to express your thoughts All of us learn. Cheers ;)
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