Liquid, Money Market Funds Comprise Of A Third Of Total AUM

Kolkata: Liquid and money market products comprise nearly one-third of the mutual fund industry's total assets, lending credence to the concern, recently reiterated by the SEBI chief, that these very short term funds perhaps command an unfair share of the market – contrary to the view that the industry should rather focus more on longer term growth products. The space occupied by the liquid/money market category has been very sizeable over the years, its contribution to the whole ranging between 20 per cent and 40 per cent in recent times. The most-recent tally compiled by the Association of Mutual Funds in India (AMFI), pertaining to May 31, 2007, shows that the category contributes a high 28 per cent of the total assets, a shade lower than what was being managed by all the equity funds put together – 30 per cent. Income funds had the highest share, accounting for 35 per cent of the total. It may be mentioned here that the securities regulator has in recent days expressed concerns over asset management companies depending heavily on allocations by investors to liquid funds (and short term debt funds). Inflows into such products, especially big-ticket investments by corporates, are often not sustainable, it was felt. The need to have a more broad-based clientele was also underlined in this context.Fund houses point out that one or two other product categories now have a firmer grip of the market than before. Growth funds, for instance, have in recent years come to occupy about a third of the overall space. Their exact contribution has been 35 per cent and 40 per cent as on March 2007 and March 2006 respectively. These figures are more than the 25 per cent share growth funds had in March 2005.Most of the other categories – including balanced funds – appear to be insignificant in comparison. As on May 31, 2007, balanced products had only 2 per cent of the pie, while exchange-traded funds (a more recent addition to the industry) also contributed 2 per cent. ELSS, which are essentially equity funds combining income tax benefits under Section 80C of the I-T Act, accounted for about 3 per cent of the total. Gilt funds had less than one per cent with them.Liquid funds, typically used by wholesale investors for very short periods, mostly for their treasury management purposes, have on an average provided over 7 per cent on a one-year basis, according to figures collated by Value Research.