HDFC Mid Cap Fund Hits ₹1 Lakh Crore AUM
Experts weigh in on whether a mutual fund can become too large to deliver strong returns as HDFC Mid Cap Fund becomes the fourth active scheme to reach the milestone, with equity mutual fund inflows moderating to ₹24,697 crore in July
HDFC Mid Cap Fund has crossed the ₹1 lakh crore assets under management (AUM) milestone, becoming the fourth active mutual fund scheme to reach this level. The fund's achievement has raised questions among investors about whether a mutual fund can become too large to deliver strong returns.
The ₹1 lakh crore AUM milestone is a significant one, with only three other active mutual fund schemes - Parag Parikh Flexi Cap Fund, HDFC Flexi Cap Fund, and HDFC Balanced Advantage Fund - having reached this level. However, experts say that investors should not avoid a fund simply because of its size. According to Bharath Rathore, executive director at Anand Rathi Wealth, fund size does not by itself determine performance.
In July, equity mutual fund inflows moderated to ₹24,697 crore, with small-cap funds attracting the highest net inflows of ₹7,768 crore, followed by mid-cap funds at ₹6,192 crore and flexi-cap funds at ₹4,710 crore. Large-cap funds, on the other hand, saw a net outflow of ₹1,322 crore. Debt funds attracted net inflows of ₹1.88 lakh crore, and the total assets under management of the mutual fund industry rose to ₹85.76 lakh crore at the end of July.
SIP contributions remained strong, rising to ₹31,961 crore in July from ₹31,781 crore in June. This suggests that investors continue to have a positive outlook on the market, despite some concerns about the size of certain mutual funds.
## Why it matters The question of whether a mutual fund can become too large to deliver strong returns is an important one for investors. According to Sriram BKR, senior investment strategist at Geojit Financial Services, size can become a concern when a scheme operates in a segment with limited market depth or liquidity. However, Rathore points out that large AUM does not necessarily prevent a fund from generating alpha over the long term, especially in categories such as mid-caps where fund managers have room to deploy the remaining allocation across other market-cap segments.
## What happens next As the mutual fund industry continues to grow, it will be important for investors to keep a close eye on the performance of their funds and to consider factors beyond just size when evaluating a scheme. With the total assets under management of the mutual fund industry rising to ₹85.76 lakh crore, it is likely that more funds will reach the ₹1 lakh crore AUM milestone in the future. Whether or not this will impact their ability to deliver strong returns remains to be seen.
