Average AUM is ambiguous

December 6th, 2008

The sharp drop in mutual fund’s assets in November 2008 hit the headline of the business and general newspapers on December 3, when the Association of Mutual Funds in India (AMFI) on December 2 announced average assets under management (AAUM) for the month of November 2008. The AMFI data show that the AAUM of 36 mutual funds for November 2008 declined to Rs 402,029 crore or by Rs 29,873 crore over the October AAUM of Rs 431,902 crore.

The media reporters, with no scent of data research, flashed news of seven per cent decline in AAUM in November 2008 due to heavy redemptions. However, the AMFI puts AUM data for November 2008 on its website on December 5 which shows that AUMs as on November 30, 2008 increased by Rs 10,401 crore to Rs 405,112 crore from Rs 394,711 crore as on October 31, 2008. This means that mutual funds witnessed net inflows in November and hence there were no net outflows.

The average assets under management (AAUM) is an ambiguous term which only indicates the average figure for the month based on sales proceeds from existing and new schemes and redemptions and repurchases of old schemes during the month. So, the AAUM numbers differ from the assets under management (AUM) at the end of the month. The fund houses prefers the AAUM as there are chances that AUM as on date could be decline because of redemption of interval or short terms funds.

The mutual funds, which witnessed a sharp declined in AUM of Rs 88,568 crore in October 2008 due to outflow of Rs 46,793 crore in income funds and value erosion of Rs 41,775 crore in equity related schemes, recorded inflows in November in liquid and money markets schemes. However, despite net inflow of 13,790 crore during the month, the AUM rose by Rs 10,401 crore largely due to value erosion in equity related schemes.

The mutual fund industry would like to forget financial year 2008-09 as its AUM in the past eight months has declined by a whopping Rs 189,898 crore from Rs 595,010 crore as on April 30, 2008 to Rs 405,112 crore as on November 30, 2008 mostly due to value erosions in equity related funds as outflows in income and gilt funds were around Rs 40,000 crore.

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