Domestic mutual fund investors are increasingly inclined towards passive funds, which are schemes that follow a commodity or securities or benchmark index. A net inflow of Rs 27,083 crore has been seen in passive funds during the last six months. In March, inflows have been recorded for the fifth consecutive month in such schemes. On the other hand, Nigerian has been seen in actively managed funds. While on the one hand he reported a net inflow of Rs 9,115 crore in March, on the other hand his six-month net inflows stood negatively at Rs 36,395 crore.
Industry participants feel that this is the turning point for passive funds and that they can hold on to the MF industry for the next few years.
This category of passive products includes index funds, equity exchange-traded funds (ETFs), gold ETFs and funds from foreign market investing funds.
Swaroop Mohanty, CEO of Mirae Asset Management, said that we are excited to see net inflows of Rs 9,000 crore by equity funds in March. But I am equally excited about the passive funds, which have seen a net inflow of about Rs 8,200 crore. We have seen a lot of maturity in the way investors are buying financial assets.
Industry officials say that because of the large-scale returns not generated by many large-cap funds, the choice of passive funds could be a major reason for investors. Mohanty said that it is a fact that many benchmark funds are declining and in such an environment there will definitely be a move to passive funds.
Flows in passive categories have also been supported by new fund proposals (NFOs) in both equity and debt categories. Investing in passive funds is generally less expensive than active funds, in which the decision to invest is made at the discretion of the fund manager.
Recent data from S&P Indices Versus Active (SPIVA) India for the period ending in December 2020 reveal that 81 per cent of the equity large cap funds and 65 per cent of ELSS funds in the country underperformed their respective indices. is. Most of the large-cap funds, mid- and small-cap funds and equity-linked savings schemes (ELSS) have underperformed their benchmarks over the one-year, three-year and five-year periods.
