Performance, size correlate with mutual fund flows: CRISIL

Fund flows into mutual funds in recent months, have shown a strong correlation to performance and size of fund houses.

Large fund houses, with a large number of better performing funds in line with the CRISIL Composite Performance Ranking (CPR) of mutual funds are attracting higher inflows.

The Indian mutual fund industry's average assets under management (AAUM) grew for the third month in succession and stood at Rs. 5.02 trillion in February 2009 as compared to Rs. 4.62 trillion in January 2009. The AAUM crossed the Rs. 5 trillion milestone in February 2009 for the first time after it dipped below this level in October 2008.

According to Krishnan Sitaraman, Head – CRISIL FundServices, ''The top three fund houses, which recorded the highest increase in absolute AAUM over January and February 2009 have a large number of funds which fall in the CRISIL~CPR 1 (very good) and CRISIL~CPR 2 (good) ranking clusters and are large in size.''

These included:

  • Birla Sun Life Mutual Fund (11 funds of which were ranked CRISIL~CPR 1 or CRISIL~CPR 2)
  • ICICI Prudential Mutual Fund (8 funds ranked CRISIL~CPR 1 or CRISIL~CPR 2)
  • Reliance Capital Mutual Fund (10 funds ranked CRISIL~CPR 1 or CRISIL~CPR 2)

Size appears to be a key factor determining choice, with large fund houses recording higher net inflows as compared to the relatively small ones, a number of which have seen lower inflows, if not net outflows.