Passive accelerating faster than active
Banking Frontiers|August 2023
Anil Ghelani, CFA, Head - Passive Investments & Products, DSP Mutual Funds shares growth & future scope for passive investments in India & foreign countries:
Passive accelerating faster than active

Anil Ghelani recommends integration of analytics & digital business team to drive hyper-personalization

Ravi Lalwani: What are the recent trends in passive investing in India over the last 5 years? What trends do you expect in the years ahead?

Anil Ghelani: In India, we are gradually seeing the growth of passive investments. In the last 3 years, Equity Index Funds and ETFs got a higher net inflow compared to the active funds in the large-cap category and this trend is likely to continue. From the total mutual fund industry of about ₹44 billion, ETFs and index funds are now about ~16% of the total AUM. In my view, by 2025 ETFs and index funds will account for 25-30% of the mutual fund industry in India.

How do passive investments in India compare with other foreign countries?

Many countries are seeing potential growth in passive investments like ETFs and index funds, but US has most of the passive investors. In 2012, US industry saw passive funds get higher net new inflows as compared to active funds. This trend picked up so fast that in a few years, active funds started getting net outflows and only passive funds have been getting net new inflows. As of the end of 2022, the US now has about 47% of total mutual fund assets in passive funds. Globally in other countries, this number is estimated at only 10-12%.

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