At the end of the financial year 2018, the AUM of all passive funds stood at Rs. 83,000 crore. This has now risen to around Rs. 7 lakh crore at the end of March 2023, which is a growth of 54 per cent annually.
Why invest in a passive fund?
Many investors are happy with returns equivalent to the benchmark. They don't want to take what is known as fund manager risk. This is the risk that arises because of the wrong investment decisions made by the fund manager, which causes an active fund to underperform. Many investors also don't want to undertake the elaborate exercise required to select an active fund. They may also not have access to a financial advisor who could suggest them the right active funds. For such investors, index funds make a lot of sense as the procedure for selecting these funds is easier.
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