InvestorQ : How were flows in September into debt funds and other categories?
Neelam Naik made post

How were flows in September into debt funds and other categories?

Anu Biswas answered.
2 years ago

For the month of Sep-20, the big outflows were from debt funds but passive funds showed some hope in a dull month. Here are the highlights for you to focus on.

a) Debt funds saw outflows in excess of Rs.52,000 crore. But that is largely due to quarter end considerations. September is the half-year of the fiscal when a lot of companies and institutions handle liquidity outflows in the form of advance tax, GST and other statutory dues.

b) This perspective is also ratified by the fact that other treasury products like arbitrage funds have also seen heavy outflows in the month of Sep-20 of over Rs.2200 crore. Interestingly, during the month there has been a rush for floating rate funds. That could be due to treasurers are betting on bond yields going up due to high of fiscal deficit.

c) Otherwise, the outflows have been largely concentrated in the short duration debt funds only. This includes funds like money market funds, liquid funds and very short duration funds which institutional investors normally use to park temporary liquidity ahead of statutory dues.

d) One more trend in September 2020 is that passive investment appears to be coming comes of age. In terms of flows, the passives ruled the roost. Overall, passive funds like index funds/ETFs, gold ETFs, global FOFs and bond ETFs saw inflows of Rs.6350 crore.

e) The combination of higher costs and steeper kurtosis or the inability to beat the market, is making life difficult for a active fund managers. They are increasingly finding it hard to beat the indices as data has shown in the last couple of years.

f) One story can be missed out in Sep-20. The big story for the particular month was the surge in demand for international fund of funds or FOFs. Global indices have been star performers and investors are now putting money where there is clear performance visibility.