A current research revealed that passive funds have gained traction among investors in India in the previous couple of years, capturing a market share of over 17 per cent of Assets Under Management (AUM) in 2023 from 1.4 per cent in 2015. A passive fund is an funding instrument that simulates the efficiency of a market index or a selected market section. Passive index funds, Exchange Traded Funds (ETFs), and Fund of Funds investing in ETFs are examples of those funds.Â
Low-cost nature of passive funds is largest attraction
According to the research by Motilal Oswal Asset Management Company, 61 per cent of investors who participated in the research have invested in at the very least one passive fund and 53 per cent of respondents elevated their allocation to passive funds in the final 12 months. The low-cost nature of passive funds has been cited as the most important cause by investors for choosing such funds, adopted by the simplicity of those funds and market returns. The research was carried out among greater than 2,000 investors collaborating from throughout the nation.
“At the end of FY-2018, the AUM of all passive funds put together stood at around Rs 83,000 crore. It has grown to more than Rs 7 lakh crore as of Mar-2023, rising 8.5 times in just 5 years at a compound annual growth rate (CAGR) of 54 per cent,” the research talked about.
Around 90% of respondents investing by way of Index FundsÂ
Investors appear to have a desire between Index Funds and ETFs with 87 per cent of respondents investing by way of Index Funds as in comparison with 41 per cent investing by ETFs. Also, greater than 75 per cent of respondents mentioned that they most well-liked to speculate frequently each month utilizing systematic funding plans (SIPs), whereas solely 42 per cent mentioned that they leaned in direction of lumpsum funding.
When it involves investor preferences in phrases of allocation, the research revealed that almost half of these investing in passive funds allocate 10-30 per cent of their portfolio to passive funds. About 15 per cent of respondents talked about that they’ve allotted 31-50 per cent in passive funds, whereas 12 per cent of respondents allotted greater than 50 per cent of their portfolio in passive funds On the opposite hand, 28 per cent of investors collaborating in the research have a lower than 10 per cent allocation to passive funds.
According to the fund home, it is because ETFs are purchased and offered on the inventory exchanges and require the investor to have a demat account. On the opposite hand, investing in Index Funds has no such requirement and is relatively simple much like some other mutual fund transaction.
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Investment panorama in IndiaÂ
The funding panorama in India is evolving quickly, with greater than 80 per cent of respondents saying that they had been planning to carry their investments for greater than 3 years, whereas 16% deliberate to carry for 1-3 years. Only 3 per cent of investors mentioned that they had been trying to liquidate their investments in lower than a yr.
Interestingly, the research discovered that 60 per cent of respondents get data on markets and investments from social media platforms like Twitter and Instagram.
On the opposite hand, solely round 26 per cent of respondents comply with conventional media shops for data associated to investing. In its annual report launched on Monday, capital markets regulator Sebi mentioned that it’s engaged with the mutual fund business to introduce ‘MF Lite’ laws for passive funds in a bid to scale back the compliance burden and foster innovation.
(With PTI inputs)Â
