New Delhi: In an eventful year for the domestic mutual fund industry, the assets under management (AUM) of fund houses, excluding the domestic fund (FOF) of the fund, closed at a record in 2021 37.73 trillion, according to a report by global analytics company Crisil Ltd.
industry couple 6.70 trillion, a record absolute asset gain for any calendar year on record. According to Crisil, the previous peak was 4.80 trillion in 2017, followed by 4.5 trillion in 2020. In percentage terms, the industry grew by 22% in 2021 as compared to 17% in 2020.
Moreover, in a break from 2020, equity-oriented funds captured the lion’s share.
CRISIL has listed out the key trends of the record breaking year for the Mutual Fund industry.
Asset flows for 2020 and 2021 show different plot lines
According to Crisil, net inflows were almost the same in 2020 and 2021 1.81 trillion, but the plot lines were vastly different. While 2020 saw sharp inflows in debt-oriented mutual funds, 2021 saw a bulk cornering in equity-oriented mutual funds.
“To be sure, net inflows into debt-oriented funds in 2020 came despite the liquidity crisis, as much as 1.94 trillion outflow in March – highest since September 2018, which was observed 2.10 trillion outflow after IL&FS credit crisis – pandemic and ensuing economic lockdown left investors stunned,” it writes in a report.
In contrast, in 2021, investors put a substantial portion of their money in equity-oriented mutual funds, attracted by strong gains in the underlying equity market. Net inflow of Equity Mutual Funds seen 91,000 crore, while passive fund was received 1.14 trillion and hybrid funds 1.02 trillion. Passive funds and hybrid funds benefited from a slew of new fund offers in 41 and 8 funds respectively.
ETFs become the largest MF category
Benefiting from strong inflows from EPFO and other pension trusts, coupled with new launches and individual investor interest, the assets of exchange-traded funds (ETFs) overtook liquid funds as the largest MF category in 2021. The category closed with the property in 2021. Of compared to 3.84 trillion 3.61 trillion for liquid funds.
“Liquid funds lost their luster as their returns fell in line with lower interest rates, making other money market MF categories more attractive to risk-averse investors. CRISIL said this category of assets is now treated at par with other debt MF categories as a market marker rather than an amortization rule, which had benefited earlier.
SIP flow sets record for 2021 calendar year
The industry recorded a net inflow of 1.14 trillion through Systematic Investment Plans (SIPs) in 2021, crossing 1 trillion mark for the first time in any calendar year since AMFI announced this data.
SIP inflows hit their record monthly high even in the last month of 2021 11,300 crores, after crossing 11,000 crores for the first time in November 2021.
Further, the number of SIP accounts increased to 4.91 crore 5.65 trillion of industry assets as of December.
Floating-rate, target maturity and ESG funds gain traction
The year 2021 saw categories like floating-rate debt funds and passively managed debt funds gain traction within the industry as target maturity funds. Floating-rate debt funds benefited from their ability to survive interest rate fluctuations, but with rising interest rates for target maturity debt funds, investors focus on credit quality.
“On the equity front, we also saw increasing traction in the environmental, social and governance (ESG) sector as the theme of ‘conscious investing’ became popular among investors,” Crisil said.
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