Mutual fund folio growth: how the April 2023 story panned out

12 May 2023 , 09:52 AM

The monthly AMFI flow report on mutual fund flows has two aspects to it. The first is about flows into various categories of mutual funds, which gives you the colour of where money is flowing. But it is also about the retail spread of mutual funds, and that is best captured by the growth in folios. Mutual fund folios (account numbers unique to an AMC) are a fair proxy for the expansion of retail interest in mutual funds. Obviously, growth in folios each month may not be too relevant. However, a longer perspective of folios across fund categories over one year can provide meaningful insights. Here is a comparison of year-on-year mutual fund folio growth for various categories of mutual funds; between April 2022 and April 2023. Let us start with the macro picture first.

MF Folios: Macro picture for April 2023

How does the macro picture for April 2023 for mutual fund folios look like across open-ended and close-ended funds?

Macro picture	Total Folios Apr-23	Total Folios Apr-22	Folio Growth
Open ended Funds	14,59,25,989	13,07,19,455	11.63%
Closed Ended and Interval Funds	4,90,068	5,75,086	-14.78%
Grand Total	14,64,16,057	13,12,94,541	11.52%

Data Source: AMFI 

At a macro level, the total number of mutual fund folios as of April 2023 stood at 14.64 crore against 14.57 crore folios one-month ago. On a yoy basis over April 2022, total folios are up 11.52% overall. However, the growth has predominantly come from open-ended schemes with folio growth of 11.63%, while close-ended fund folios saw contraction in folios by -14.78%. That is not surprising considering that close-ended folios account for less than 0.3% of the total folios in India.

Debt fund folios shrink in April 2023, but less than in March

Debt fund folios continued to be under pressure in April 2023 and the yoy comparison clearly shows that the number of folios has fallen over April 2022.

Macro picture	Total Folios Apr-23	Total Folios Apr-22	Folio Growth
Long Duration Fund	46,138	24,307	89.81%
Overnight Fund	6,59,479	5,65,194	16.68%
Ultra Short Duration Fund	6,32,337	6,19,228	2.12%
Money Market Fund	4,22,740	4,14,834	1.91%
Liquid Fund	17,75,399	17,51,319	1.37%
Gilt Fund	1,77,311	1,76,768	0.31%
Dynamic Bond Fund	2,30,966	2,30,463	0.22%
Gilt Fund - 10 year CD	42,343	43,980	-3.72%
Corporate Bond Fund	6,13,934	6,55,144	-6.29%
Medium to Long Duration	1,06,795	1,14,730	-6.92%
Medium Duration Fund	2,55,984	2,78,064	-7.94%
Floater Fund	2,34,702	2,58,609	-9.24%
Credit Risk Fund	2,43,984	2,69,097	-9.33%
Banking and PSU Fund	2,95,048	3,27,456	-9.90%
Low Duration Fund	9,35,894	10,45,333	-10.47%
Short Duration Fund	5,04,524	5,69,283	-11.38%
Total of Debt Funds	71,77,578	73,43,809	-2.26%

Data Source: AMFI

Out of the 16 categories of debt funds available in India as per the AMFI classification, only 5 categories showed at least 1% expansion in the number of folios, while the remaining 11 fund categories saw flat folios or contraction in folios. Long duration fund folios grew by a surprising 89.8%, but the base is too small. It does show that investors are willing to lock themselves into longer durations at higher yields. The RBI decision to hold rates must have just ratified that view. Overnight funds also attracted a lot of treasury interest with 16.68% growth in folios. The categories that saw the maximum shrinkage of folios were the discretionary debt fund categories like short duration funds, low duration funds and the banking & PSU funds; apart from credit risk and floater funds. Debt fund folios in April 2023 shrank -2.26% yoy, but that is better than the -3.07% shrinkage in March 2023.

Equity fund folios continued their aggressive journey in April 2023

In contrast to debt funds, there was no ambivalence in the growth of equity fund folios; which saw macro level expansion of 13.23% in the number of folios yoy in April 2023.

Macro picture	Total Folios Apr-23	Total Folios Apr-22	Folio Growth
Small Cap Fund	1,11,25,117	81,00,585	37.34%
Multi Cap Fund	41,74,058	31,96,257	30.59%
Dividend Yield Fund	7,30,675	5,72,644	27.60%
Mid Cap Fund	1,06,95,532	88,54,201	20.80%
Value Fund/Contra Fund	47,14,942	40,61,202	16.10%
Large & Mid Cap Fund	78,44,968	68,45,348	14.60%
ELSS	1,52,79,990	1,40,05,645	9.10%
Sectoral/Thematic Funds	1,32,28,388	1,21,47,243	8.90%
Flexi Cap Fund	1,27,15,541	1,17,91,520	7.84%
Focused Fund	52,96,509	51,17,009	3.51%
Large Cap Fund	1,29,55,752	1,25,33,497	3.37%
Total of Equity Funds	9,87,61,472	8,72,25,151	13.23%

Data Source: AMFI

All the 11 categories of equity funds as per AMFI classification saw accretion in folios, which is like a 100% strike rate. Small cap funds again topped the folios growth at 37.34%, largely on account of NFOs and alpha hunting. Oher growth stories in terms of equity fund folios were multi-cap funds at 30.59%, dividend yield funds at 27.60% (largely on SBI NFO effect) and mid-cap funds at 20.82%. This surge in folios in active equity funds can be attributed to the cumulative impact of NFOs and record SIP flows of over Rs1.55 trillion in the last one year. Equity fund folios in April 2023 grew 13.23% yoy, lower than March 2023.

Hybrid fund folios story of April was similar to March

Here we have combined hybrid funds with the solution-based funds to give a more complete picture. Folios have grown across categories, exception arbitrage funds, which saw contraction in folios due to treasury redemptions.

Macro picture	Total Folios Apr-23	Total Folios Apr-22	Folio Growth
Multi Asset Allocation Fund	10,67,029	8,04,549	32.62%
Aggressive Hybrid Fund	53,04,415	50,76,631	4.49%
Dynamic Asset Allocation (BAF)	44,43,726	42,73,085	3.99%
Retirement Fund	27,62,964	26,88,576	2.77%
Conservative Hybrid Fund	5,16,833	5,06,641	2.01%
Childrens Fund	29,28,945	28,95,835	1.14%
Equity Savings Fund	3,59,867	3,58,128	0.49%
Arbitrage Fund	4,44,440	5,00,467	-11.19%
Total of Hybrid Funds	1,78,28,219	1,71,03,912	4.23%

Data Source: AMFI

Out of the 8 categories of hybrid and solution-based funds available in India as per the AMFI classification, 7 categories saw expansion in folios, with only arbitrage funds seeing folio contraction. Arbitrage funds are debt equivalents, despite being classified as a hybrid fund. Over the last few months, the big star in terms of folios growth has been multi-asset allocation funds; despite the base having grown now. The 32.6% folio growth in multi-asset allocation funds can be attributed to NFOs and also to the novelty of the category. All other categories saw single-digit growth in folios. The number of folios in arbitrage funds contracted -11.2% amidst volatile markets. Overall, for the category, number of folios yoy grew 4.23% in April 2023, compared to 4.72% in March 2023.

Passive funds showed 100% strike rate in April 2023 too

Under passive category, we have included equity and debt related index products, apart from gold funds and Fund of Funds (FOF). The idea is to include fund categories where the intent is not alpha hunting but to passively mirror an index or underlying asset class.

Macro picture	Total Folios Apr-23	Total Folios Apr-22	Folio Growth
Index Funds	40,20,423	25,46,000	57.91%
Other ETFs	1,21,10,751	1,08,82,436	11.29%
GOLD ETF	47,12,199	43,62,502	8.02%
Overseas Fund of funds (FOF)	13,15,347	12,55,645	4.75%
Total of Passive Funds	2,21,58,720	1,90,46,583	16.34%

Data Source: AMFI

Like in the case of equity funds, all the 4 categories of passive funds available in India, saw expansion in the number of folios. Passive fund folios gained from targeted NFOs during the year. Index funds, index ETFs and gold funds have seen a sharp spike in the number folios, although that has not translated into growth in AUM for gold funds. Passive fund folios grew 16.34% in April 2023; lower than 18.43% in March. 

Two trends are visible from the April 2023 folios story. Debt fund folios are gathering momentum while equity and passive folios have been losing momentum in the last 2 months. Secondly, across categories, there is a preference for alpha generation, innovative ideas, unique product positioning and a past performance to boot.