Passive fund folios grow over 50% for first time in November 2024

13 Dec 2024 , 10:09 AM

PASSIVE FLOW STORY FOR NOVEMBER 2024

After a robust October, passive fund flows fell to almost a third in November 2024.The net inflows into passive funds at ₹7,061 Crore in November 2024; less than a third of the October passive fund flows, largely on account of net selling in arbitrage funds. Let us look at category-wise flows among passives; and with the positive flows. Equity oriented domestic index funds and equity oriented domestic index ETFs saw bulk of the passive net inflows at ₹5,187 Crore and ₹2,050 Crore respectively in November 2024; while gold ETFs also participated with net inflows of ₹1,257 Crore, as did Silver ETFs at ₹930 Crore. There were several categories that saw net outflows in November 2024. These included Debt oriented ETFs ₹(1,517) and TMIFs at ₹(806) Crore. Out of the 12 categories of passive funds with flows; 7 categories showed positive net flows and 5 showed negative flows.

HOW INDEX FUNDS AND INDEX ETF PERFORMED IN NOVEMBER 2024

The table below ranks index funds and index ETFs in India on 3-year returns (regular plans). We have only considered funds where a 3-year track record is available and the other funds without such a track record have been eliminated.

Passive Fund Scheme Name	1 Year (%) Returns		3-Year (%) Returns		Launch (%) Returns
CPSE ETF	47.40	45.41		16.80
Kotak Nifty PSU Bank ETF	27.94	37.21		5.91
Nippon India ETF Nifty PSU Bank BEES	27.98	37.21		6.70
BHARAT 22 ETF	33.73	36.15		17.15
Mirae Asset NYSE FANG+ ETF	62.50	25.07		26.08
Motilal Oswal Nifty Midcap 100 ETF	33.26	24.50		16.27
ICICI Prudential Nifty Midcap 150 ETF	32.63	23.62		28.01
Nippon India ETF Nifty Midcap 150	32.46	23.60		25.18
Nippon India ETF Nifty Dividend OPPS 50	31.76	23.54		16.21
ABSL Nifty Midcap 150 Index Fund	32.09	22.82		26.87

Data Source: AMFI

There are a total of 169 index funds and index ETFs with minimum 3 year track record. If you look at the average returns, these 169 funds have generated average returns of 24.13% over a 1-year period. Over a 3-year period, the CAGR returns on these funds stands at 14.92%. Let us now shift focus to how the fund of funds (FOFs) have performed in November 2024.

HOW FUND OF FUNDS (FOF) PERFORMED IN NOVEMBER 2024

The table below ranks fund of funds (FOFs) in India on 3-year returns (regular plans). We have only considered funds where a 3-year track record is available and the other funds without such a track record have been eliminated.

Passive Fund Scheme Name	1 Year (%) Returns	3-Year (%) Returns	Launch (%) Returns
ICICI Prudential BHARAT 22 FOF	44.06	33.21	20.36
Nippon India Asset Allocator FOF	25.72	16.12	19.59
Nippon India Nifty Next 50 Junior BEES FOF	49.58	16.00	17.67
ICICI Pru Nifty Alpha Low – Vol 30 ETF FOF	34.79	15.88	14.48
ICICI Prudential Passive Strategy Fund (FOF)	29.13	14.60	13.98
LIC MF Gold ETF FOF	22.05	13.88	5.72
Invesco India Gold ETF FOF	22.22	13.84	6.14
SBI Gold Fund	22.14	13.79	6.24
Axis Gold Fund	21.38	13.79	6.27
Quantum Gold Savings Fund	22.02	13.72	11.90

Data Source: AMFI

There are a total of 79 fund of funds (FOF) with minimum 3 year track record. If you look at the average returns, these 79 funds have generated average returns of 22.45% over a 1-year period. Over a 3-year period, the CAGR returns on these funds stands at 10.48%. However, what is important is that in index ETFs, index funds and in FOFs, there are wide variations in terms of 3-year returns, which could be due to the disparate nature of these funds.

PASSIVE FUND FOLIO GROWTH: NOVEMBER 2024 OVER NOVEMBER 2023

We see some good tidings from the folio growth numbers of passive funds in November 2024. Only 12 categories with meaningful flows have been considered in these rankings of folios. The table below compares the folio numbers of these 12 categories of passive funds as of end November 2024 over November 2023. They are ranked on folio growth.

Passive Mutual Fund Schemes (Folios)	Folios Nov-24 (in Numbers)	Folios Nov-23 (in Numbers)	Growth (%)
Silver ETF	5,82,990	1,43,973	304.93%
Equity oriented Index Funds (Domestic Index Funds)	1,16,93,034	55,22,356	111.74%
Equity oriented ETFs (International ETFs)	6,45,788	3,38,153	90.98%
Other Index Funds	89,572	54,653	63.89%
Equity oriented ETFs (Domestic ETFs)	1,47,83,768	1,02,87,068	43.71%
Gold ETF	62,52,992	48,91,187	27.84%
Income/Debt Oriented Index Funds (TMIF)	1,69,732	1,40,310	20.97%
Income/Debt Oriented ETFs	23,35,324	19,49,996	19.76%
Income/Debt Oriented Index Funds (Other than TMIF)	17,760	15,444	15.00%
Equity oriented Index Funds (International Index Funds)	2,55,187	2,36,359	7.97%
Fund of funds investing overseas in Passive Funds	6,49,986	6,69,188	-2.87%
Fund of funds investing overseas in Active Funds	7,29,587	8,17,075	-10.71%
Total of Passive Funds	3,82,05,720	2,50,65,762	52.42%

Data Source: AMFI (TMIF is target maturity index funds)

The above table compares the passive fund folios at the end of November 2024 with the passive fund folios at the end of November 2023 (12-month yoy growth). Here are the inferences.

• Passive fund folios yoy growth in October 2024 stood at a robust 52.42%; compared to 49.71% in October, 45.71% in September, 42.57% in August, 38.86% in July, and 34.24% in June 2024. That is progressive build-up of investor intensity, if you go by growth in folios. The total folios of passive funds stand at 382.06 Lakhs as of end November 2024; compared to 368.23 Lakhs as of October, 350.60 Lakhs in September, 336.83 Lakhs in August, and 321.81 Lakh as of July 2024.
•  What about leaders and laggards? Again, silver led folio growth at 304.93%, followed by equity oriented domestic index funds at 111.74% and equity oriented international ETFs at 90.98%. A total of 10 out of 12 categories saw folio expansion, with only FOFs investing in overseas active funds and FOFs investing in overseas passive funds; seeing a contraction in folios in the month of November 2024 on a yoy basis.

Even in a rather difficult month, the folio growth of passive funds has been relatively robust, which shows passive funds building traction. For the first time, the folio growth on a yoy basis has crossed 50%.

PASSIVE FUNDS AUM: NOVEMBER 2024 OVER NOVEMBER 2023

We have seen some pressure on AUM growth of passive funds in recent months due to the market correction as the passive AUM has fallen sequentially. That applies to November 2024 too, although the cuts are not as sharp as it was in October 2024.

Passive Mutual Fund Schemes	AUM Sep-24 (₹ Crore)	AUM Sep-23 (₹ Crore)	Growth (%)
Silver ETF	12,333.66	2,984.04	313.32%
Equity oriented Index Funds (Domestic Index Funds)	1,58,037.04	75,025.32	110.64%
Gold ETF	44,244.82	26,995.73	63.90%
Equity oriented Index Funds (International Index Funds)	5,511.19	3,871.47	42.35%
Equity oriented ETFs (International ETFs)	13,194.39	9,416.87	40.11%
Equity oriented ETFs (Domestic ETFs)	6,62,700.66	4,79,360.67	38.25%
Fund of funds investing overseas in Passive Funds	8,656.28	6,940.03	24.73%
Fund of funds investing overseas in Active Funds	18,076.08	16,478.10	9.70%
Income/Debt Oriented ETFs	97,514.67	89,345.68	9.14%
Other Index Funds	3,507.61	3,448.21	1.72%
Income/Debt Oriented Index Funds (TMIF)	92,377.88	94,522.38	-2.27%
Income/Debt Oriented Index Funds (Other than TMIF)	13,741.35	14,545.49	-5.53%
Total of Passive Funds	11,29,895.63	8,22,934.00	37.30%

Data Source: AMFI (TMIF is target maturity index funds)

The above table compares the AUM at the end of November 2024 with the AUM at the end of November 2023 (12-month yoy growth). Here are the inferences.

• Passive fund folios yoy growth in November 2024 tapered to 37.3%; compared to 42.87% in October, 44.92% in September, 44.62% in August, and 40.19% in July 2024. Not only has the growth in AUM come down sharply in November and October 2024; but even the overall AUM is down sequentially. However, that is more due to the sharp fall in the equity markets in the last two months on account of the FPI sell-off. In such conditions, the folios give a more reliable picture.
• What about leaders and laggards? Again, silver AUM led the growth at 313.32%, followed by domestic index funds at 110.64% and Gold ETFs at 63.90%. A total of 10 out of 12 categories saw folio expansion, with debt index funds (ex-TMIF) contracting -5.53% and debt oriented TMIFs contracting by -2.27% in AUM in November 2024 on yoy basis.

Even in a rather difficult month, the folio growth of passive funds has been relatively robust, which shows passive funds building traction. Despite the value loss, as is evident in the pressure on Aum growth, the folios have continued to add up. The past experience has been that passive funds do extremely well when the active funds start to become too volatile. We may be just about seeing that sort of trend starting to manifest in the markets.