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Legacy Funds Outshine Newcomers in Market Turmoil
30 Sep
Summary
- Legacy fund houses beat newer rivals in four of six categories.
- Established AMCs offer better investor retention during turbulence.
- Larger AUM allows legacy funds greater IPO and bond market access.
Established mutual fund houses have outperformed newer asset management companies (AMCs) in four out of six categories over the past year. Legacy AMCs delivered an average return of 3.2% in the large- and mid-cap fund category, compared to 0.8% for newer funds.
This performance divergence occurs amidst market turbulence, with the Nifty 50 experiencing declines. Despite volatility, mutual fund assets under management (AUM) grew approximately 16% year-on-year to ₹87.08 trillion as of August.
Established AMCs better retain investors due to longer track records and consistent performance, making their systematic investment plans (SIPs) 'stickier.' Newer AMCs faced challenges building portfolios in difficult market conditions.
Legacy funds also benefit from scale, enabling greater capital commitment to IPOs and potentially better rates on corporate bonds, leading to enhanced returns. This advantage contributes to their outperformance in various fund categories.
