Robust equity inflows to keep earnings growth strong for AMCs

The mutual fund industry’s QAAUM (Quarterly Average Assets Under Management) was up 37 per cent year-on-year (Y-o-Y) (9 per cent Q-o-Q) to hit Rs 59 trillion (end Q1FY25).

The equity segment grew 55 per cent Y-o-Y and equity formed 56 per cent of total AUM, up 49 per cent in Q1FY24.

Sequentially, AUM grew by Rs 5 trillion.

Equity net inflows stood at Rs 1.3 trillion in Q1FY25, with equity AUM up to Rs 33 trillion.

The SIP AUM swelled to Rs 10.7 trillion at FY24 end, 34 per cent of equity assets, and Rs 12.4 trillion by end-Q1FY25 (still 34 per cent share).

Systematic Investment Plan (SIP) ticket size has risen close to Rs 2,500 vs Rs 2,200 a year ago.

New fund offers ( NFO) launches attracted large lump-sum investments.

Among listed AMCs, in Q1FY25, Nippon AMC recorded the highest growth of 54 per cent Y-o-Y while ABSL AMC saw the least growth at 19 per cent.

HDFC AMC clocked 38 per cent growth and UTI AMC grew 25 per cent.

HDFC AMC and Nippon AMC grew equity market share, while UTI AMC and ABSL AMC lost some shares.

HDFC AMC had the highest yields.

The exchange-traded funds (ETFs) segment held steady at 16 per cent but the debt segment grew at a lower 9 per cent Y-o-Y in Q1FY25 with debt share in AUM down from 23 per cent in Q1FY24 to 18 per cent in Q1FY25.

Between FY19 and FY24, average SIP inflows climbed to Rs 7,700 crore/month and in Q1FY25, SIPs averaged Rs 20,800 crore.

Outstanding SIP accounts rose from 26 million (end-FY19) to 84 million at the end of FY24 and up to 90 million as of Q1FY25.

Equity MF inflows continued to rise in July and August with the August 2024 metric at Rs 46,100 crore (up 5 per cent M-o-M over July).

SIP inflows recorded Rs 23,600 crore (Aug 2024 ) vs Rs 23,300 crore (Jul 2024) while SIP AUM rose Rs 13.4 trillion (up 58 per cent Y-o-Y).

Total AUM was Rs 66 trillion (up 41 per cent Y-o-Y) with equity AUM at Rs 39.7 trillion, up 60 per cent Y-o-Y, and 60.1 per cent share of total AUM.

By August 2024, ICICI Pru AMC (13.13 per cent) regained leadership in equity AUM market share from HDFC AMC (12.97 per cent) with an NFO of Rs 8,400 crore for the Energy Opportunities Fund in July.

Nippon held equity share at 7.02 per cent while UTI AMC share was 3.8 per cent.

Revenue from operations for HDFC AMC was at Rs 770 crore (35 per cent Y-o-Y). For other listed players, growth in revenue from operations was also
above 20 per cent.

Debt remains a challenge due to tax changes with hybrids, credit AIFs, and direct bond investing seeing more momentum and banks also raising FD rates.

AMCs are moving to commission structures linked to the total expense ratio (TER) rather than fixed basis points (bp).

High-net-worth individuals (HNIs) continue to invest in portfolio management service (PMS) and alternative investment funds (AIFs) instead and this space is competitive and crowded.

Robust SIPs could drive strong earnings growth if the market trend stays bullish.

HDFC AMC holds 81.9 per cent of rated AUM in outperforming schemes in Jul-24.

Nippon has 63.5 per cent of AUM in outperforming funds.

The largest scheme, Nippon India’s smallcap fund is top rated.

ABSL AMC saw subdued performance while UTI AMC lagged listed peers.