compounded annualized growth (CAGR) in AUM for the period Mar, 09 till Feb, 10 is LIC AMC, followed by IDFC AMC and Franklin Templeton AMC. Equity funds focused on the Pharmaceutical sector witnessed the maximum rise in AUM to the tune of 108.57% in the period from Mar, 09 to Feb, 10. On the contrary, funds that were focused on FMCG and IT witnessed the maximum drop in AUMs to the tune of -87.59% and -40.67% respectively in the same period. As far as debt funds are concerned, the highest growth in AUM is observed in Floating rate funds (139.18%) and Short term funds (129.51%). Long term funds witnessed a fall in AUM to the tune of -74.54%. The AUM in monthly income plans (MIPs) however, increased substantially by 233.32%. (Source: Crisil Database) Investor preference remained high for Ultra Short term bond funds as evidenced by a 190.74% growth in their AUM. Liquid funds were preferred less as there were restrictions pertaining to the average maturity of the portfolio. As per SEBI regulations, liquid funds can now invest in instruments that carry a maximum average maturity of 91 days only. This has greatly impinged their returns. As a result, their AUM plummeted by -34.61%. However, SEBI regulations pertaining to the valuations of debt papers with maturity even less than 182 days on a mark to market basis (with effect from July 01, 2010) may increase the volatility in returns from Ultra Short term bond funds as their maturity is high as compared to Equity Funds Fund Category Weighted Mean Top Fund rolling return Pure Large Cap 74.49 HDFC Equity Fund Pure Mid Cap 93.86 Principal Emerging Blue Chip Fund Diversified/Flexicap 81.21 Reliance Equity Opportunities Fund Value Style Funds 74.15 ICICI Prudential Discovery Fund Global Funds 55.81 Templeton India Equity Income Fund Thematic Funds 61.96 JM Basic Fund Infrastructure Funds 59.23 Birla Sun Life Infrastructure Fund ELSS 74.9 ICICI Prudential Tax Plan
Return
90.43 110.60 93.14 105.54 87.45 109.88 83.55 93.49
liquid funds. This may reverse investors’ preference towards the less volatile liquid funds. Gilt funds witnessed severe redemption pressure owing to poor performance amidst a rising interest rate scenario. With rising inflationary and borrowing pressures, the long Debt Funds Fund Category Weighted Mean Top Fund rolling return Liquid Funds 4.52 Fortis Overnight Fund Ultra Short term Funds 4.91 Fortis Money Plus Short term debt funds 6.31 Templeton India Short term Income Fund Long term debt funds 4.63 ICICI Prudential Income Plan Short term gilt funds 1.5 HSBC Gilt Fund Long term gilt funds -0.71 Birla Sun Life Govt Securities L T P Dynamic/Flexi 4.56 ICICI Prudential Debt funds Income Opportunities Fund
Return
5.32 5.39 10.18 6.97 3.49 14.35 10.99
Rolling period: 1 month, Frequency: Daily Weight: Assets under management
24| APRIL 2010
term yields are moving in an upward trajectory. This has adversely impacted the returns of gilt funds due to mark to market losses. Consequently, investors are wary of investing in gilt funds thereby leading to a dramatic fall in their AUM. Investors have changed their preference in favour of equity funds while Gilt and Money market funds have lost favour during the period from Jan, 09 till Dec, 09. Rise in equity markets since March, 09 have again led to a rebalancing of portfolio in favour of equity funds. How the funds performed? Mid cap funds performed better than the pure large cap funds in the study period. Small cap stocks rise faster than large cap stocks in the event of a market upturn from a prolonged bearish phase. Funds that have a combination of large cap stocks and mid cap stocks in their portfolio, called blended or flexicap funds performed better than the large caps but missed the rally in mid caps to a great extent. Growth stocks performed better than value stocks as evidenced by a lower return in value style funds in the same period. Surplus liquidity in the economy affected the returns of money market funds and they were able to generate a weighted average rolling return of 4.5-5% in the study period. Of late, they have been giving returns in the range of 3.5% to 4% per annum. Higher inflationary pressures coupled with high borrowing pressures leading to rising yields adversely impacted the returns of long term debt funds. However, debt funds with a lower average maturity, being less susceptible to interest rate fluctuations were less affected by the rising interest rate scenario. As a result, they performed better than long term debt funds. Gilt funds underperformed owing to rising long term yields caused by rising inflationary pressures, huge government borrowing and a revival in the economy. Flexi debt or dynamic bond funds with exposure to instruments of varying maturity and with active management of portfolio duration weathered the unfavorable debt market situation in a more efficient manner. Hybrid Funds Fund Category Weighted Mean Top Fund rolling return 68.57 HDFC Prudence Fund Balanced (Equity oriented) 22.96 Tata Young Citizens Fund Balanced (Debt oriented) MIP (Conservative) Equity <15% 21.68 Reliance MIP MIP (Aggressive) Equity >15% 29.10 HDFC MIP- LTP
Return
76.95 40.51 24.09 29.35
Weight: Assets under management Equity oriented balanced funds generated a weighted average rolling return of 68.57% in the study period. MIPs were the flavour of the season as asset allocation or investment strategy products and they didnâ&#x20AC;&#x2122;t upset the investors having generated a return of 25%-30% during the last one year.
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