Decline in equity flows may push up asset size needed by AMCs to break even

The recent decline seen in equity flows could push up the asset size required by asset management companies to break even. In June, equity inflows tapered to Rs 240 crore, while July saw outflows of Rs 2,480 crore, the first time in four years. 

The industry’s assets under management (AUM) have grown substantially spurred by retail participation via systematic investment plans (SIPs), especially after demonetisation. The bulk of this growth has been driven by equity funds, which charge higher fees than debt and hybrid schemes. The total expense ratio (TER) for such schemes can be 1.5-1.7 per cent of AUM as against 0.1-1 per cent for liquid or debt schemes.

“The breakeven AUM has inched up gradually in the past 5-7 years