The end of the year brings several reports on the performance of mutual fund houses, and this year, the review has been shocking albeit a disappointing one. With the exception of Birla Sun Life, SBI Mutual, Reliance MF and HDFC MF, none of the mutual fund houses were able to draw profits by the end of the financial year in March 2011. The mutual fund industry was able to draw a profit of approximately Rs. 406 crore this year as opposed to Rs. 743 crore in its last operating year. HDFC MF and Reliance AMC topped the profitability charts with surpluses hitting Rs. 242 crore and Rs. 261 crore respectively. Birla Sunlife and ING MF gained profits of Rs. 84 crore and Rs. 22 crore respectively in the financial year.
Reliance Mutual Fund attributed its exemplary performance due to its concentrated focus on Systematic Investment Plans, asset quality and retail money on an incremental basis, owing the long-term profitability to the small size of the retail money industry. The rest of the top fund houses that have published their annual financial statements have not made any major profits, either making straight losses or significant drops in their profitability. A decline of 3-83% in profits was viewed in fund houses like Sundaram Mutual Fund, Canara Robeco MF, DSP Blackrock MF, ICICI Prudential MF, Deutsche MF, Tata MF and Kotak Mahindra MF in the past one year, while another 18 fund houses reported straight losses this year.
Mutual fund industry has declared its biggest worrying factor to be the decline in investments made by retail and institutional investors in the industry. With just 57% of retail investment inflows in the mutual fund industry this year due to the recession of 2008, this statistic surely puts a crease of worry for mutual funds houses and also to the investors. Attracting and retaining investors is the biggest challenge faced by the mutual industry today, which is relying heavily on the turnaround of the stock market to acquire many investors. While several mutual fund houses are selling Systematic Investment Plans (SIPs), a safer investment option for investors, aggressively, it will take some time for investors to place their faith in such a scheme and for the fund to popularize.
As an investor it is mandatory that you safe guard your investments by taking prudent financial decisions. One of the most sought after advice that most financial advisors are now advising their investors is to stay put and not exit from their investments for some time now. Although the industry has seen a decline, there is a sure possibility that the happy days will bounce back soon. Withdrawing from funds and reinvesting in another will not make much difference since this situation is due to the global phenomena of recession. Withdrawing now will reduce your already minimized returns due to processing fees, exit load etc, thus, negating all the returns that your investment has earned till date. Opting for debts like personal loan or a home loan is not a very good idea since the interest rates are bound to create a financial mess if your investments have been a victim to the down turn.
Once your investments are buoyant, considering the particular fund’s performance in the following quarter you can choose to withdraw from the fund; but consider doing that only if your financial advisor has given you a good cost benefit analysis of sticking to the decision of withdrawing. Else it is better to wait till the markets bounce back and when your negative returns come to a nil returns position and then turn positive. Remember that it is your hard earned money that is at stake.