Reliance Mutual Fund gets back the crown

The battle for the leadership position in the mutual fund industry continued in March, with Reliance Mutual Fund snatching back the crown it had ceded to Prudential ICICI MF the previous month, reports The Economic Times.

Reliance MF’s assets under management (AUM) as of March 31, 2007 was at Rs 46,307 crore, while Prudential ICICI MF was a distant second at Rs 37,870 crore.

However, as per latest numbers available on Amfi website, the total AUM of all MFs put together has fallen by around Rs 8,500 crore due to year-end related redemptions. Reliance Mutual was an exception to the trend, with its AUM rising around Rs 3,000 crore.

"The growth in our assets has been largely due to the seven odd FMPs which we launched last month which raised more than Rs 4,000 crore," says Vikrant Gugnani, president of Reliance Mutual. "Since liquid funds form a very small part of our corpus, we are partly insulated from the liquidity crunches affecting the system at the end of every quarter," he adds.

Gugnani says that a large part of investment in FMPs is coming from retail investors. A FMP is a type of a mutual fund that invests in debt financial instruments whose maturity date coincides with a specific time period indicated in advance by the fund, and hence the name ‘Fixed Maturity Plan’.

Meanwhile, advance tax outflows, banks and institutions pulling out funds on account of CRR hikes and tight liquidity have meant that most fund houses have seen a contraction in their assets under management. The huge outflow of Rs 30,000 crore towards the advance tax payments in March led to severe crunch in the money market, with the call money rates shooting up to a 10-year high of 60%.

This meant that banks and other financial instruments would prefer to invest directly in the market rather than coming via mutual funds. Call money is money on call or overnight funds borrowed by a bank to meet their daily asset-liability mismatch.

The benchmark indices also posted negative returns on a month to month basis, which further fuelled the shrinking in AUMs. Reliance MF has also become the first mutual fund house to cross $10 billion in assets under management.