2021 is the most successful year for Mutual funds investments. All sectors like liquid, debt, equity gave positive returns except gold. The return on most equity schemes was over 20%. Out of 905 equity schemes, 461 schemes offered higher returns than their respective benchmarks. Smallcap schemes offer the highest returns, averaging close to 60%.
Mutual Funds Investments Growth
The total assets of the mutual fund industry have increased for the ninth consecutive year. In 2021, the total assets of 45 mutual fund companies increased by 24 % to a record high of Rs 38.50 lakh crore. Net investment in equity schemes, which was only Rs 9,400 crore in 2020, multiplied to Rs 71,600 crore in 2021. Total assets increased by Rs 7 lakh crore in 2021 over NAV.
The New Fund Offer (NFO) scheme, which has been in the top 100, played a significant role in this. ICICI Flexicap Fund and SBI Balanced Advantage Fund raised a record amount of Rs 10,000 crore and Rs 13,000 crore, respectively.
In the year 2020, 72 lakh investors had been added. However, in 2021, it increased by 2.65 crores. Negative returns from gold and real estate, as well as lower interest rates on term deposits in banks, have made investors more inclined towards equity mutual funds.
05 Remarkable Efforts of SEBI to Boost Mutual Funds Investments
- In the year 2021, SEBI took some important steps, which made the mutual fund industry more transparent.
- Implementing the Potential Risk Class Matrix (PRC Matrix) rule has reduced the risk in debt plans. According to this rule, in each debt plan, the fund manager has to pay PRC matrix (risk taken by them) and it cannot be violated.
- According to the 2nd rule, from July 1, all mutual fund managers and key members will have to invest 20% of their salary in the schemes they are managing and will have a lock-in period of three years.
- SEBI has approved Exchange Traded Funds (Silver ETFs) for silver, just like gold, and now some mutual fund silver ETFs are entering the market.
- All mutual funds have to abide by the Environment, Social and Governance (ESG) rules in each scheme.
Because of these new rules and efforts so many Plans with some new concepts came on the market this year.
2020 Vs 2021
| Details | Year 2020 | Year 2021 | Growth (%) |
|---|---|---|---|
| Total Assets | 31 lakh Crore Rupees | 38 lakh Crore Rupees | 24% |
| Portfolio | 9.42 Cr. | 11.71 Cr. | 24% |
| SIP Amount (Yearly) | 96,000 Cr | 1,04,000 Cr. | 6% |
| SIP Portfolio | 3.76 Cr. | 4.81 Cr. | 28% |
Key Factors of Mutual Funds Investments Popularity
New Investment Methods are Popular: New methods of investing in mutual funds are gaining popularity. These include the former Flexi STP and Freedom SWP. The concept of SIP is now ingrained in every household. SIP had nearly five crore account holders and crossed the Rs 11,000 crore mark in November alone. More than Rs.1 lakh crore a year is being invested in mutual funds through SIPs alone and hence in the stock market.
Involvement of Domestic and Foreign Companies: Indigenous L&T Mutual Fund was acquired by HSBC, a foreign company, while Sundaram Mutual Fund, a domestic mutual fund, acquired Foreign Principal Mutual Fund.
What’s Next?
The mutual fund industry is becoming more and more advanced and transparent. Mutual funds are not a separate asset class. There is no asset class today that does not have a mutual fund plan. Plans for cryptocurrency may also come soon.
Conclusion
The expectation that mutual fund equity schemes will return in the new year as they did last year may be wrong. However, for those who are willing to wait five years or more, it may be advisable to invest in mutual fund equity schemes under the guidance of an investment expert.
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