Passive mutual fund assets swell 31% to ₹8.74-lakh cr in 1 year

Passive mutual fund schemes performed much better than most actively managed schemes such as equity, hybrid, debt and solution-oriented schemes last year, largely due to record-breaking spree of most popular indices.

The assets under management of passively managed mutual fund schemes have rallied 31 per cent to ₹8.74 lakh crore last month against ₹6.65 lakh crore logged in January, largely driven by new fund offers and increased inflows into index funds.

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In fact, passive funds accounted for 21 per cent of overall AUM of ₹42.04 lakh crore (excluding passive funds) as of December-end, according to the Association of Mutual Funds in India data.

The AUM of actively managed funds was up 28 per cent to ₹41.74 lakh crore last year against ₹32.67 lakh crore in January. Despite record collection through new fund offers, the huge outflows and weak performance from debt funds have mellowed down the performance actively managed funds last year.

Uncomplicated, economical

Vishal Jain, CEO, Zerodha Fund House said passive funds are gaining ground both in city and smaller town due to its uncomplicated investment structure and lower cost. With most of the analysts talking of rally in benchmark indices, he added that first-time investors are really excited in investing in passive products and it is the best way for such investors to enter equity market before graduating to other products.

Among passive offers, index funds have registered the highest gain of 49 per cent in December to ₹2 lakh crore against ₹1.34 lakh crore in January on the back of higher inflows and the launch of new funds. In fact, the number of index funds has increased by 44 to 196 (152) in the last one year as the industry played to the gallery by launching NFOs to attract fresh investment.

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Exchange traded funds recorded the gain of 27 per cent to ₹6.23 lakh crore (₹4.92 lakh crore) in last one year. The AUM of gold ETFs gained 25 per cent to ₹27,362 crore (₹21,836 crore) despite investors booking profits at regular intervals.

Notwithstanding the freeze of mutual fund investment overseas, fund of funds investing overseas also increased 9 per cent to ₹24,064 crore (₹22,138 crore).

In January 2022, SEBI directed MFs to stop taking fresh subscriptions in schemes investing in overseas stocks as the industry was close to the limit of $7 billion mandated by RBI. This aside, there is a separate limit of $1 billion for investing in overseas exchange-traded funds.