According to research by global analytics firm Crisil Ltd, assets under management (AUM) of fund houses, excluding domestic fund of funds (FoF), climbed to a record 37.73 trillion in an exciting year for the domestic online mutual fund business.

 

The industry grew by $6.7 trillion, setting a new high for absolute asset growth in a calendar year. According to Crisil, the previous high point was 4.80 trillion in 2017, with 4.5 trillion expected in 2020. In terms of percentage growth, the industry grew by 22% in 2021, compared to 17% in 2020. In addition, unlike in 2020, equity-oriented funds took the lion's share. Crisil has compiled a summary of major themes from the mutual fund industry's record-breaking year.

 

Asset flows see divergent plot lines

According to Crisil, net flows in 2020 and 2021 were around the same, but the plot lines were drastically different. While debt-oriented mutual funds attracted significant inflows in 2020, equity-oriented mutual funds captured the majority of inflows in 2021.

 

Investors, on the other hand, poured more money into equities-oriented mutual funds in 2021, owing to robust gains in the underlying stock market. Net inflows into equity mutual funds totalled 91,000 crores, while passive funds received 1.14 trillion and hybrid funds received 1.02 trillion. With 41 and 8 new funds, respectively, passive and hybrid funds benefited from a flurry of new fund offerings.

 

ETFs become the largest MF category

Exchange-traded funds (ETFs) have surpassed liquid funds as the biggest MF category, thanks to robust inflows from the EPFO and other pension trusts, as well as fresh launches and individual investor demand. In 2021, the category had assets of 3.844 trillion, compared to 3.611 trillion for liquid funds.

 

Liquid funds lost their lustre when interest rates fell, making other money market mutual funds more appealing to investors with a larger risk appetite. The assets of the category are now regarded in the same way as those of other debt MF categories, as a mark to market, rather than the amortisation rule that it previously benefited from.

 

SIP inflows are at an all-time high

Through systematic investment plans (SIPs), the sector saw net inflows of $1.14 trillion, surpassing the $1 trillion mark for the first time in any calendar year since AMFI began reporting this data.

 

After reaching the 11,000-crore barrier for the first time in November 2021, SIP flows reached a new monthly high of 11,300 crores in the last month of 2021. Furthermore, the number of SIP online accounts increased to 4.91 crores in December, accounting for $5.65 trillion in industry assets.

 

Floating-rate, target maturity and ESG funds are all gaining popularity

Floating-rate debt funds and passively managed debt funds in the form of target maturity funds gained acceptance in the market in the year 2021. While floating-rate debt funds benefited from their ability to track interest rate movements, target maturity debt funds gained appeal as investors focused on credit quality in the face of increasing interest rates.

 

Wrapping Up

If you are an experienced and discerning investor, strengthening the SIP each year might be a rewarding prospect. However, in order to make the process as simple as possible, an online mutual fund SIP is the way to go, since it eliminates the unsettling offline jousting and allows for improved fund administration.

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