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Passive funds gaining traction, grow eight times in last five years

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Passive investment has been gaining traction over the last few years, with the opportunity for delivering alpha slowly waning. The assets under management of passive funds have jumped to ₹7-lakh crore as of March-end, against ₹83,000 crore in 2018. It has grown by 8.5 times at a compounded annual growth rate of 54 per cent in the last five years.

According to a survey conducted by Motilal Oswal Asset Management Company, 87 per cent of investors preferred to invest through index funds, while just 41 per cent invested through Exchange Traded Funds.

According to the fund house, investors with demat accounts preferred ETFs, which they could buy and sell through the stock exchanges, while investments in index funds could be done through mutual funds, it said.

Nearly half of those investing in passive funds allocate 10-30 per cent of their portfolio in passive funds, while about 15 per cent of investors allocated 31-50 per cent, it said.

Interestingly, investors preferred SIPs over lumpsum investment in passive funds, with over 75 per cent of respondents willing to invest every month using SIPs.

The more disciplined approach to investing has proved to be a great way to tide over market volatility, allowing investors to cut through the noise. As of March-end, monthly SIP inflows crossed the ₹14,000-crore mark for the first time, staying above the ₹10,000-crore mark for 19 months straight.

MOAMC, which has passive fund AUM of over ₹17,000 crore across 30 passive funds, conducted the survey with over 2,000 investors.

The survey also revealed that over 60 per cent of respondents get information on markets and investments from social media platforms such as Twitter and Instagram.

Pratik Oswal, Head of Passive Funds, Motilal Oswal AMC, said passive funds are widely popular in the US, with over 50 per cent market share, and command 17 per cent share in India.





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