The share of debt mutual funds (MFs) in the overall industry assets has shrunk dramatically over the past 16 months, a report by Business Standard stated.
As per the report, at the end of July, the assets under management (AUM) of debt MF schemes (including closed-ended schemes) stood at ₹12.64 lakh crore - 33.5 percent of the overall AUM of ₹37.8 lakh crore for the domestic MF industry. This is a sharp fall, compared to April 2021, when debt AUM accounted for 47 percent of the overall industry AUM, it noted.
This change in the mix - more in favour of equity assets - is a healthy sign for the industry, which corrals more money for managing equity schemes than debt, the report pointed out.
The share of debt MFs has been consistently sliding after the pandemic, with interest rates headed south and stock markets ascending. While the overall AUM pie has grown 17 percent since April 2021, debt AUM has compressed 17 percent, highlighted BS.
Meanwhile, non-debt AUM — largely equity — has risen 46 percent during this period, driven by persistent inflows into equity-oriented schemes and rising asset prices, it added.
Debt funds are mutual funds that invest in fixed income instruments, such as corporate and government bonds, corporate debt securities, and money market instruments and offer capital appreciation. They are also referred to as fixed income funds.
Most debt funds posted negative returns in the recent past. The returns were poor, particularly for long and medium-to-long-term funds.
In the past three months, long duration and medium-to-long funds gave negative returns. Even the past one month's returns for long, medium-to-long and medium-duration funds were in negative territory.
At the same time, short and low-duration funds in the past three months gave positive returns, albeit muted, of nearly 1 percent. Short duration funds gave a 1.03 percent return in the past three months and low duration funds gave 0.77 percent. The corresponding figures for one month were 0.40 and 0.26 percent.
