The Rise Of Passive Funds
Outlook Money|November 2024
The popularity of passive funds among retail investors has risen post Covid, and fund houses are out with many variations of ETFs and index funds. Does this category present a new opportunity for investors?
Kundan Kishore
The Rise Of Passive Funds

Over the last 5-10 years, passive funds have surged in size and popularity in India as Well as in the international markets like the US. In the US, the assets in passive funds has grown four times in the past decade from $3.2 trillion at the end of 2013 to $15 trillion at the end of 2023. Says Anil Ghelani, CFA, head - passive income and products, DSP Mutual Fund: "With passive funds witnessing positive flows consistently over the past decade, for the first time in history of the US mutual fund industry, the assets under management (AUM) of passive funds has crossed that of active funds."

In India, the share of passive funds' AUM has doubled from 8 per cent of the mutual fund industry AUM in August 2020 to 16 per cent in August 2024. In just one year, as of August 2024, the AUM of passive funds has increased from ₹7.58 trillion to ₹10.96 trillion, a growth of 45 per cent. In the last three years, passive funds got a higher net inflow compared to active funds in the large-cap category. According to experts, this trend is likely to continue.

"While in some global markets like the US, we have already seen passive funds taking over in size; in India we are seeing a gradual growth. In my view, together with growth in the overall industry, we will see this (passive funds') proportion increase to 25 per cent in the next 3-5 years," says Ghelani.

This evolving scenario gives rise to the question: are passive funds outperforming active management, or are they creating a more competitive and cost-effective option that ultimately benefits the investors?

The Turning Point

Historically, passive funds were closely linked to index investing, primarily focused on replicating the performance of broad equity indices,such as the Nifty and the Sensex.

This story is from the {{IssueName}} edition of {{MagazineName}}.

Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.

This story is from the {{IssueName}} edition of {{MagazineName}}.

Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.

MORE STORIES FROM OUTLOOK MONEYView all
Gold ETFs And FoFs
Outlook Money

Gold ETFs And FoFs

While Indians love to invest in physical gold, even mutual funds offer the option, but in paper format.

time-read
2 mins  |
November 2024
PLANNING TO BUY CHILD INSURANCE? THINK TWICE
Outlook Money

PLANNING TO BUY CHILD INSURANCE? THINK TWICE

Child insurance plans combine insurance and investment but often offer low returns due to high costs, making a combination of a term insurance cover and mutual fund a better option for securing your child’s higher education needs

time-read
7 mins  |
November 2024
How Do You Define Happiness?
Outlook Money

How Do You Define Happiness?

Money does buy happiness, but after a while, the appeal fades. We talk about our relationship with money, but, maybe, it’s time to revisit our relationship with happiness

time-read
5 mins  |
November 2024
Avoid Crypto As It Is Highly Volatile
Outlook Money

Avoid Crypto As It Is Highly Volatile

I am 22 years old and have recently started working. I want to invest a small portion of money in cryptocurrency. How should I go about it? Does it require a huge capital investment?

time-read
2 mins  |
November 2024
Invest Right, Don't Speculate
Outlook Money

Invest Right, Don't Speculate

The lure of high returns and quick gains from equity tips, cryptocurencies, and equity F&O can be enticing. But remember, return of capital is more important than return on capital

time-read
4 mins  |
November 2024
The Wedding & Budget: Is Minimalist Trend The Right Knot For You?
Outlook Money

The Wedding & Budget: Is Minimalist Trend The Right Knot For You?

Indian weddings are known for their pomp and grandeur, but minimalist weddings are also in vogue now. Dia Mirza was one such celebrity who went for a minimalist wedding. If you also want to keep things minimal on your big day, here’s how to do it

time-read
9 mins  |
November 2024
Here's How To Buy An ETF?
Outlook Money

Here's How To Buy An ETF?

Mutual funds are the preferred choice for retail investors. However, they come at a cost and fund management risk, apart from other risks. A smarter alternative is to invest through ETFs.

time-read
1 min  |
November 2024
How Passive Funds Help Diversify
Outlook Money

How Passive Funds Help Diversify

Passive funds provide a simple way to invest in broad markets as well as in specific themes and sectors, making them ideal for an investor's satellite portfolio

time-read
2 mins  |
November 2024
The Rise Of Passive Funds
Outlook Money

The Rise Of Passive Funds

The popularity of passive funds among retail investors has risen post Covid, and fund houses are out with many variations of ETFs and index funds. Does this category present a new opportunity for investors?

time-read
10 mins  |
November 2024
Tax Reforms: What's In Store?
Outlook Money

Tax Reforms: What's In Store?

The government is working on reforming the existing Income-tax Act, 1961. The impending reforms have raised many questions in the minds of taxpayers. Will the old regime and deductions be done away with? Will it really simplify your life? What's the need for these reforms? We try to answer these and other questions regarding tax reforms

time-read
10+ mins  |
October 2024