Passive funds have been steadily eating into the market share of actively managed funds with active participation of EPFOs and retail investors.
Passive funds grow better
In the last one year, the asset under management of passive funds including ETFs have jumped 32 per cent to ₹5,19,367 crore as of December 2022 against ₹3,93,473 crore logged in December 2021 despite the gold and debt funds delivering a flattish growth.
On the other hand, actively managed funds assets have increased four per cent as of last December to ₹35,56,804 crore against ₹33,98,337 crore registered in December 2021.
In last five years, the active managed funds have registered a growth of 73 per cent from ₹20,51,457 crore recorded in December 2017 while passive funds have grown nearly six times from ₹75,208 crore registered in December, 2017.
Siddharth Srivastava, Head (ETF Product), Mirae Asset Mutual Fund said the active participation of pension funds and the government taking the passive route for disinvestment along with active retail investors interest in light of underperformance of active funds have worked in favour of passive funds.
Target Maturity Funds
Moreover, he said the Target Maturity Funds have gained exponential popularity in last three years.
As of last November, there were 52 TMFs with combined asset under management of ₹132,140 crore. Investors have taken a liking for TMFs due to the visibility of the underlying portfolio and potential yield upon maturity.
Unlike fixed maturity plans, investors have the option to subscribe or redeem anytime. TMFs are also low-cost product and will continue to find traction in investor portfolio, he said.
Gold ETFs
Gold ETFs have also caught investors attention with the AUM increasing at an annualized 34 per cent in last five years to ₹21,051 crore.
Typically, during the times of recession and high inflation, gold has performed relatively well, because of which it is considered as a relatively safer investment leading to higher inflows in this asset class.
The best-case scenario for gold in 2023 is slowdown in global economic activity and a shift by the world’s central banks toward looser financial conditions. A successful reopening in China may also have a positive impact on gold, he said.