Mutual funds’ average assets under management dip on record 16-per cent outflow

Following a record outflow of about 16 per cent in the average assets under management (AAUM) last month, the Indian mutual fund (MF) industry has registered a marginal dip in its AAUM for the month ended July '10.

According to the Association of Mutual Funds in India (Amfi) data, at the end of July the cumulative AAUM stood at Rs6,65,567 crore, which was lower by about 1.5 per cent compared with end July 2009.

Industry analysts say the current decline in the average assets of the MF industry has to be viewed in the backdrop of the tight liquidity conditions in the market.

Areport in The Economic Times quotes Jaideep Bhattacharya, chief marketing officer, UTI Asset Management, as saying that the liquidity in the system had reduced especially after the outflow of cash due to the 3G auction and advance tax payments last month that have between them sucked up upwards of Rs1-lakh crore from the industry.

Also in light of the improvement in the credit offtake, banks are no longer investing in mutual funds as aggressively as they did in the past, he adds.

According to the report bank money in MFs has started drying up as seen from RBI data, which shows tha investment by commercial banks has reduced to just around Rs26,000 crore for the fortnight ended 16July, '10.