Reliance AMC, the country?s second-largest mutual fund, had a rough run in managing its equity assets, with investors choosing to move out of several of its underperforming schemes and more than 75% of its funds witnessing an erosion in assets.
The fund house saw a decline in assets under management (AUM) for 17 of its 22 equity schemes in FY13. What?s more, five of its schemes ? Reliance Growth, Reliance Vision, Reliance Diversified Power Sector, Reliance Natural Resources Retail and Reliance Regular Savings Equity ? are all among the list of top 10 schemes that saw the largest AUM decline in FY13. Together, the schemes saw an AUM decline of R3,800 crore as on March 31, data collated from Value Research, a mutual fund tracker, shows.
Overall, the fund house saw its equity AUM dip by R3,383 crore over the fiscal year, the highest equity AUM decline among 43 fund houses in FY13. In contrast, ICICI Prudential MF added about R92 crore worth of quity assets during the year and HDFC MF added R31 crore.
Due to steep erosion, Reliance AMC?s market share of equity assets slipped 91 bps to 13.8% at the end of FY13 from 14.7% a year earlier. However, the AMC is still the second largest fund house in terms of equity assets. ?We believe in consistent, long-term performance and short-term volatility in returns does not worry us. We are very much focussed on maintaining our market share (of equity assets),? said Sunil Singhania, head ? equities, Reliance Capital Asset Management.
Dhruva Chatterji, senior research analyst, Morningstar India, said, the asset decline in Reliance MF schemes is symptomatic of the sizeable outflows seen in equity schemes across fund houses in FY13. ?It?s just that the funds that have underperformed have seen larger outflows,? he said. However, he added that underperformance would be the overriding factor for the AUM decline in Reliance schemes: ?Investors chase performance and if funds don?t perform there is no reason why they should stay invested.?
Reliance Diversifed Power Sector and Reliance Natural Resources Retail, which invest in sectors such as energy, engineering and metals, have been victims of sector underperformance. The former?s AUM has declined about 57% in the past two years, while the latter?s AUM has nearly halved.
However, the fund house was really hit by the sustained underperformance of its flagship schemes ? Reliance Vision and Reliance Growth. Together, the schemes saw an AUM decline of nearly R2,000 crore in FY13, with both schemes underperforming their benchmark indices over a one-year and three-year period. Reliance Vision?s equity AUM has declined about 48% since FY11, while that of Reliance Growth has dipped 35%.
Singhania insisted that Reliance Growth has had a long history of outperformance and the scheme has not done too badly compared to the benchmark. However, he admitted that several of the bets taken by Reliance Vision did go awry in the past few years. Part of the problem is that Reliance Vision and Reliance Growth garnered sizeable assets during FY07 and FY08, when the markets were scaling new highs, he added.
The last fiscal was a tough year for the MF industry despite the 8% gains in broader benchmark indices. Equity schemes saw sustained outflows, with net outflows totalling R12,931 crore. Apart from HDFC MF, ICICI MF and IDFC MF, other top 15 fund houses saw a decline in their equity asset base. Besides Reliance MF, DSP BlackRock MF (R1,780 crore), Sundaram MF (R1,558 crore), Tata MF (R904 crore), UTI MF (R888 crore) and SBI MF (R799 crore) also saw sizeable AUM declines over the year.
