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Big Mutual Funds with assets over Rs 10,000 crore

May 28, 2017 | 0 comments

The sustained money flowing into the mutual fund (MF) sector in the past two years has propelled the assets of several equity schemes into the Rs 10,000-crore club. While just three schemes were part of this club two years ago, as many as 10 schemes today manage assets of over Rs 10,000 crore. This article covers the Big Mutual Funds which are big in size i.e amount invested in schemes are more than 10,000 crores and discusses does Fund size matter?

Does Fund Size matter?

 Fund size means the amount of money that a fund manages, the industry jargon for which is Assets Under Management (AUM). Many people like to invest in big funds because they feel they are more likely to do well. Size is not an absolute number. India is a growing economy. Therefore, as the size of the economy expands the definition of the “big fund” too will change. A decade back Rs.5000 crore fund may have been a large fund. But today it would get classified as a medium-sized fund.

A large fund size communicates popularity or the long history of a fund. But even they don’t guarantee that a fund will continue to do well. Remember, past performance isn’t a guide to future performance. But  You can’t pick a random large fund and say that just because it’s large it must be good

A fund can become unwieldy to manage if it grows too large but the impact of the fund size on the performance will clearly depend on various factors like the asset class it is investing in and the investment strategy and philosophy of the fund. Not all large funds will be good. But funds became large only because they were good at some point in time. You should have some minimum AUM for me to consider that fund. One should not invest in very small AUM funds. They could be giving good returns in short term but invariably do not have a long history. If it has a long history and shown good returns consistently then there is no reason its AUM would not have grown. Since, as an MF investor one is looking at long term, these short term good return funds may not sustain.

  • For a fund that predominantly invests in large cap stocks, there is no negative impact because of the size of the fund because the fund manager has no problem buying and selling stocks of any quantity at any given point of time.
  • Even for debt funds like liquid funds or ultra short-term funds, short-term fund or income funds; the size of the fund will not impact the performance unless the fund outgrows its investment style.
    • For debt funds, size becomes a critical factor because of expenses. Large funds can distribute fixed expenses over a number of investors. This can bring down the expense ratio and thus reduce its impact on fund returns. Large funds can also negotiate better rates with issuers of debt.
    • On the other hand, if a large debt fund is faced with huge redemptions, the market may not have adequate depth to bail it out. So, with debt funds, avoid the two extremes.
  • But some funds like value fund, sector fund, midcap funds, thematic funds, can get negatively impacted if the fund becomes too large.
    • The investment space here is limited. So a large sized mid-cap / sector fund may not find enough opportunities to suitably deploy its entire capital. Besides, even small transactions in a medium-sized company could distort its share prices. Here, an average-sized fund (which is neither too big nor too small) has better chances of delivering better returns.
    • Small-cap funds often restrict inflows when they are no longer able to deploy capital, such as DSP BlackRock Micro Cap Fund. This generally happens when the fund grows in size drastically. A fund cannot buy big stakes in small companies because if the fund becomes a significant shareholder in the company, it may not be able to sell its stake easily, especially during market falls. Also, large-scale buying in small companies could create ‘impact cost’, where the fund’s buying can significantly move the stock price.

Size is just one of the many factors to consider. So don’t base your investment decision purely on the fund’s size or AUM. What is more important is the consistent performance of the fund across market cycles and the ability of the fund manager to deliver good returns despite size. An investor, before investing in a fund needs to focus on the quality of the fund portfolio and how the fund has been doing vis-à-vis its benchmark as well as the peer group

Big Mutual Funds: Equity Schemes

Equity schemes with more than 10,000 crore are given below. We have listed both the regular Plan and direct plan so you can see the difference in expenses ratio and how it impacts the return. Notice that the funds have been around for a long time, most of them have completed 10 years. Returns and Assests as on May 2017.

Name of the fund Rating
Type
 Launch Expense Ratio 1 Year Return Net Assets
HDFC Prudence Fund 2 Balanced Feb-1994 2.26 32.21 22,057
HDFC Prudence Fund  – Direct Plan 3  Balanced Jan-2013 1.14 33.63 22,057
HDFC Equity Fund 2 MultiCap Jan-1995 2.05 35.12 18,586
HDFC Equity Fund – Direct Plan 2
MultiCap
 Jan-2013 1.20 36.28 18,586
SBI ETF Nifty 50 Unrated
Large Cap
 Jul-2015 – 22.70 18,228
ICICI Prudential Value Discovery Fund 5
MultiCap
 Aug-2004 2.14 22.36 17,306
ICICI Prudential Value Discovery Fund – Direct Plan 5
MultiCap
 Jan-2013 2.14 22.36 17,306
Birla Sun Life Frontline Equity Fund 5
Large Cap
 Aug-2002 0.96 25.51 16,962
Birla Sun Life Frontline Equity Fund – Direct Plan 5 Large Cap Jan-2013 0.96 25.51 16,962
HDFC Mid-Cap Opportunities Fund 4
MidCap
 Jun-2007 2.27 36.30 16,685
HDFC Mid-Cap Opportunities Fund- Direct Plan 4
MidCap
 Jan-2013 1.31 37.59 16,685
HDFC Top 200 Fund 3
Large Cap
 Sep-1996 2.05 33.79 14,312
HDFC Top 200 Fund – Direct Plan 3
Large Cap
 Jan-2013 1.37 34.77 14,312
SBI Bluechip Fund 5
Large Cap
 Feb-2006 1.97 20.06 13,339
SBI Bluechip Fund – Direct Plan 5
Large Cap
 Jan-2013 1.14 21.36 13,339
ICICI Prudential Focused Bluechip Equity Fund 4
Large Cap
 May-2008 2.07 26.06 13,156
ICICI Prudential Focused Bluechip Equity Fund – Direct Plan 4
Large Cap
 Jan-2013 1.13 27.23 13,156
Axis Long Term Equity Fund 5
ELSS
 Dec-2009 1.97 19.26 12,916
Axis Long Term Equity Fund – Direct Plan 5
ELSS
 Jan-2013 1.27 20.60 12,916
Franklin India Prima Plus Fund 4
MultiCap
 Sep-1994 2.24 20.00 10,964
Franklin India Prima Plus Fund – Direct Plan 4 MultiCap Jan-2013 1.08 21.39 10,964
ICICI Prudential Balanced Fund 4 Balanced Nov-1999 1.08 21.39 10,964
ICICI Prudential Balanced Fund Direct Plan 4
Balanced
 Jan-2013 1.08 21.39 10,964
Kotak Select Focus Fund – Direct Plan 5
MultiCap
 Jan-2013 1.00 34.04 10,270
Kotak Select Focus Fund  5
MultiCap
 Sep-2009 1.98 32.49 10,270
Reliance Equity Opportunities Fund 2
MultiCap
 Mar-2005 1.98 25.22 10,014
Reliance Equity Opportunities Fund -Direct Plan 3
MultiCap
 Jan-2013 1.34 26.21 10,014

 Big Mutual Funds:Liquid Funds

The debt fund category has evolved over the years. Based on the their stated goal, they are classified as liquid funds, short-term, ultra short-term and gilt funds. Within this universe the liquid funds have for long been the short-term parking ground for corporate and HNIs for the liquidity they offer.

Funds which do not invest any part of assets in securities with a residual maturity of more than 91 days are liquid funds.

These funds provide good liquidity, low interest rate risk and the prevailing yield in the market. Liquid funds have the restriction that they can only have 10 per cent or less mark-to-market component, indicating a lower interest rate risk. While liquidity is one factor of these funds, safe investments make them the preferred parking option for HNIs and corporates. Moreover, the maturity makes them relatively less sensitive to interest rate fluctuations, compared to other debt funds. For all these reasons, liquid funds are used as an alternative to short-term fix deposits. Most schemes have a lock-in period of a maximum of three days to protect against procedural (primarily banking) glitches, and offer redemption proceeds within 24 hours. The minimum investment size in a liquid fund varies from Rs 25,000 to Rs 1 lakh.

Short-term capital gains tax applies to liquid funds that are held for less than a year at the income tax slab that one falls in.

Name of the fund Rating Launch Expense Ratio 1 Year Return Net Assets
ICICI Prudential Liquid Plan 3 LIQUID Nov-2005 – 7.03 36,418
ICICI Prudential Liquid Plan – Direct Plan 4 LIQUID Jan-2013 – 7.07 36,418
Reliance Liquid Fund – Treasury Plan – Direct Plan 4 LIQUID Jan-2013 0.11 7.12 34,787
Reliance Liquid Fund – Treasury Plan – Institutional Plan 3 LIQUID Dec-2003 0.19 7.03 34,787
HDFC Liquid Fund 3 LIQUID Oct-2000 0.20 6.94 33,463
HDFC Liquid Fund – Direct Plan 3 LIQUID Jan-2013 0.10 7.05 33,463
Birla Sun Life Cash Plus 3 LIQUID Mar-2004 0.16 7.01 31,800
Birla Sun Life Cash Plus – Direct Plan 4 LIQUID Jan-2013 0.09 7.10 31,800
SBI Premier Liquid Fund 2 LIQUID Mar-2007 0.16 6.90 25,264
SBI Premier Liquid Fund – Direct Plan 3 LIQUID Jan-2013 0.10 6.96 25,264
UTI Liquid Cash Fund – Institutional Plan 3 LIQUID Dec-2003 0.05 7.02 22,021
UTI Liquid Cash Fund Institutional – Direct Plan 3 LIQUID Jan-2013 0.02 7.06 22,021
Axis Liquid Fund 3
LIQUID
 Oct-2009 0.20 7.04 19,245
Axis Liquid Fund – Direct Plan 4 LIQUID Jan-2013 0.13 7.13 19,245
DSP BlackRock Liquidity Fund – Direct Plan 3 LIQUID Jan-2013 0.06 7.09 15,222
DSP BlackRock Liquidity Fund – Institutional Plan 2 LIQUID Nov-2005 0.22 6.96 15,222
ICICI Prudential Money Market Fund 3 LIQUID Mar-2006 0.22 7.02 14,950
ICICI Prudential Money Market Fund – Direct Plan 2 LIQUID Jan-2013 0.12 7.11 14,950
LIC MF Liquid Fund 2 LIQUID Mar-2002 0.24 6.96 14,731
LIC MF Liquid Fund – Direct Plan 2 LIQUID Jan-2013 0.09 7.11 14,731
UTI Money Market Mutual Fund – Institutional Plan 3 LIQUID Jul-2009 0.13 7.02 14,620
UTI Money Market Mutual Fund Institutional – Direct Plan 4 LIQUID Jan-2013 0.03 7.13 14,620
Kotak Floater Short Term – Direct Plan 4 LIQUID Jan-2013 0.02 7.11 14,618
Kotak Floater Short Term Regular Plan 3 LIQUID Jul-2003 0.06 7.06 14,618
Kotak Liquid – Plan A 3 LIQUID Nov-2003 0.09 6.98 11,685
Kotak Liquid – Plan A – Direct Plan 3 LIQUID Jan-2013 0.03 7.04 11,685
IDFC Cash Fund – Direct Plan 3 LIQUID Jan-2013 0.08 7.03 11,180
IDFC Cash Fund – Regular Plan 2 LIQUID Apr-2004 0.16 6.95 11,180

Big Mutual Funds: Ultra Short Term

Ultra short-term funds invest in fixed-income instruments which are mostly liquid and have short-term maturities. Ultra short-term funds help investors avoid interest rate risks, yet they are riskier and offer better returns than most money market instruments.

If a liquid fund is a savings deposit substitute, then an ultra short-term debt fund can be used to keep the money for needs that are slightly more long term. Ultra short-term bond funds are close cousins of liquid funds but some can be vastly different. Unlike Securities and Exchange Board of India’s (Sebi) rules for liquid funds, that they can only invest in securities that mature up to 91 days, ultra short-term bond funds have no such rule. They can invest in securities that mature before or beyond 91 days. Typically, these funds invest in securities that mature within a week to about 18 months. If you wish to park your cash for 1-9 months, then this one is for you.

Financial advisers suggest that ultra short-term funds should be used for not just short-term needs but also for systematic transfer plans (STPs), instead of liquid funds.If you wish to invest a lump sum amount in an equity fund, instead of putting everything in the equity fund in one shot, put the money in an ultra short-term fund (of the same fund house) and then give instructions to switch a regular sum every month to your equity fund.

This way, while your money lies in an ultra short-term fund, it also earns a bit more than what your liquid fund could give you.

Name of the fund Rating Launch Expense Ratio 1 Year Return Net Assets
ICICI Pru Flexible Income Plan 3 Sep-2002 – 8.59 21,612
ICICI Prudential Flexible Income Plan – Direct Plan 3 Jan-2013 – 8.73 21,612
Birla Sun Life Savings Fund 3 Apr-2003 0.27 8.48 18,181
Birla Sun Life Savings Fund – Direct Plan 3 Jan-2013 0.09 8.63 18,181
Reliance Money Manager Fund 2 Mar-2007 0.55 7.83 17,865
Reliance Money Manager Fund – Direct Plan 3 Jan-2013 0.23 8.17 17,865
HDFC Floating Rate Income Fund – Short Term Plan – Wholesale Plan 3 Oct-2007 0.29 8.36 14,312
HDFC Floating Rate Income Fund – Short Term Plan – Wholesale Plan – Direct Plan 3 Jan-2013 0.19 8.47 14,312
HDFC Cash Management Fund – Treasury Advantage Plan – Direct Plan 3 Jan-2013 0.25 8.91 12,204
HDFC Cash Management Fund – Treasury Advantage Plan – Retail Plan 1 Nov-1999 0.95 8.12 12,204
UTI Treasury Advantage Fund – Institutional Plan 4 Mar-2003 0.40 8.37 11,930
UTI Treasury Advantage Fund Institutional – Direct Plan 4 Jan-2013 0.26 8.52 11,930
SBI Ultra Short Term Debt Fund 3 Jul-2007 0.42 7.69 10,853
SBI Ultra Short Term Debt Fund – Direct Plan 3 Jan-2013 0.34 7.81 10,85

Big Mutual Funds: Short Term Funds

Name of the fund Rating Launch Expense Ratio 1 Year Return Net Assets
Birla Sun Life Short Term Fund 4 Mar-1997 0.29 9.18 17,773
Birla Sun Life Short Term Fund 4 Jan-2013 0.19 9.29 17,773
Reliance Short Term Fund 2 Dec-2002 1.05 8.68 16,381
Reliance Short Term Fund 3 Jan-2013 0.45 9.33 16,381
Reliance Medium Term Fund 4 Sep-2000 0.90 8.36 10,578
Reliance Medium Term Fund 4 Jan-2013 0.25 8.98 10,578

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