Passive funds see revival of flows in October 2024; but AUM falls

13 Nov 2024 , 11:33 AM

PASSIVE FLOW STORY FOR OCTOBER 2024

After a tepid September, passive fund flows were back with a bang in October 2024.The net inflows into passive funds at ₹23,428 Crore in October 2024; was nearly six times the September net inflow and twice the August net inflows. Let us look at category-wise flows among passives; and with the positive flows. Equity oriented domestic ETFs and equity oriented domestic index funds saw bulk of the passive net inflows at ₹13,803 Crore and ₹7,798 Crore respectively in October 2024. This was amidst a slew of NFOs. Gold ETFs at ₹1,962 and Silver ETFs at ₹643 Crore were other key contributors. There were several categories that saw net outflows in October 2024. These included Debt oriented ETFs ₹(1,058) Crore; while others were marginal contributors. Out of the 12 categories of passive funds with flows; 9 categories showed positive net flows and 3 showed negative flows.

HOW INDEX FUNDS AND INDEX ETF PERFORMED IN OCTOBER 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	62.15	43.84		16.68
BHARAT 22 ETF	44.12	33.42		16.82
Kotak Nifty PSU Bank ETF	34.22	33.20		5.63
Nippon India ETF Nifty PSU Bank BEES	34.26	33.19		6.43
Nippon India ETF Nifty Div-OPS 50	40.33	21.24		15.95
Motilal Oswal Nifty Midcap 100 ETF	36.09	20.74		15.77
Nippon India ETF Nifty Midcap 150	35.39	20.41		24.23
ICICI Prudential Nifty Midcap 150 ETF	35.51	20.41		26.87
ICICI Pru Nifty Smallcap 250 Index Fund	35.74	20.00		19.84
Motilal Oswal Nifty Smallcap 250 Index Fund	35.77	19.98		28.67

Data Source: AMFI

There are a total of 160 index funds and index ETFs with minimum 3 year track record. If you look at the average returns, these 160 funds have generated average returns of 27.44% over a 1-year period. Over a 3-year period, the CAGR returns on these funds stands at 12.62%. Let us now shift focus to how the fund of funds (FOFs) have performed in October 2024.

HOW FUND OF FUNDS (FOF) PERFORMED IN OCTOBER 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 34 fund of funds (FOF) with minimum 3 year track record. If you look at the average returns, these 34 funds have generated average returns of 24.44% over a 1-year period. Over a 3-year period, the CAGR returns on these funds stands at 11.59%. 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: OCTOBER 2024 OVER OCTOBER 2023

We see some good tidings from the folio growth numbers of passive funds in October 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 October 2024 over October 2023. It may be skewed in favour of small base categories.

Passive Mutual Fund Schemes (Folios)	Folios Sep-24 (in Numbers)	Folios Sep-23 (in Numbers)	Growth (%)
Silver ETF	4,46,557	1,41,730	215.08%
Other Index Funds	87,572	37,792	131.72%
Equity oriented Index Funds (Domestic Index Funds)	1,13,77,247	52,59,365	116.32%
Equity oriented ETFs (International ETFs)	6,08,734	3,36,916	80.68%
Equity oriented ETFs (Domestic ETFs)	1,42,75,535	1,02,06,783	39.86%
Gold ETF	59,13,163	48,33,807	22.33%
Income/Debt Oriented ETFs	22,91,835	19,38,357	18.24%
Income/Debt Oriented Index Funds (TMIF)	1,65,995	1,41,832	17.04%
Income/Debt Oriented Index Funds (Ex-TMIF)	17,746	15,514	14.39%
Equity oriented Index Funds (International Index Funds)	2,54,613	2,36,575	7.62%
Fund of funds investing overseas in Passive Funds	6,59,366	6,16,399	6.97%
Fund of funds investing overseas in Active Funds	7,24,724	8,31,817	-12.87%
Total of Passive Funds	3,68,23,087	2,45,96,887	49.71%

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

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

• Passive fund folios yoy growth in October 2024 stood at 49.71%; compared to 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 368.23 lakhs as of October 2024; compared to 350.60 Lakhs in September, 336.83 in August, 321.81 Lakh in July, and 305.01 Lakh folios in June 2024.
• What about leaders and laggards? Again, silver led folio growth at 215.08%, followed by other index funds at 131.72% and domestic equity index funds at 116.32%. A total of 11 out of 12 categories saw folio expansion, with only FOFs invest in overseas active funds seeing folio contraction of -12.87%.

Even in a rather difficult month, the folio growth of passive funds has been relatively robust, which shows passive funds building traction.

PASSIVE FUNDS AUM: OCTOBER 2024 OVER OCTOBER 2023

We see some pressure on AUM growth of passive funds in October 2024 due to the market correction as the passive AUM has fallen sequentially. The table below compares the AUM of the 12 categories of passive funds as of end October 2024 over October 2023.

Passive Mutual Fund Schemes	AUM Sep-24 (₹ Crore)	AUM Sep-23 (₹ Crore)	Growth (%)
Silver ETF	12,331.00	2,844.76	333.46%
Equity oriented Index Funds (Domestic Index Funds)	1,52,701.53	68,586.48	122.64%
Gold ETF	44,545.22	26,162.72	70.26%
Equity oriented ETFs (Domestic ETFs)	6,60,072.55	4,51,337.42	46.25%
Equity oriented Index Funds (International Index Funds)	5,173.22	3,539.36	46.16%
Equity oriented ETFs (International ETFs)	12,459.60	8,548.67	45.75%
Fund of funds investing overseas in Passive Funds	8,366.11	6,251.66	33.82%
Fund of funds investing overseas in Active Funds	17,451.28	15,168.12	15.05%
Income/Debt Oriented ETFs	98,036.94	90,129.72	8.77%
Other Index Funds	3,489.50	3,361.40	3.81%
Income/Debt Oriented Index Funds (TMIF)	92,728.79	94,350.77	-1.72%
Income/Debt Oriented Index Funds (Ex-TMIF)	13,731.02	14,400.32	-4.65%
Total of Passive Funds	11,21,086.76	7,84,681.40	42.87%

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

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

• Passive fund folios yoy growth in October 2024 stood at 42.87%; compared to 44.92% in September, 44.62% in August, 40.19% in July, and 37.84% in June 2024. Not only has the growth in AUM come down in October 2024 compared to September 2024; but even the overall AUM is down sequentially. However, that is more due to the sharp fall in the equity markets in October 2024 amidst the sell-off by FPIs. In such conditions, the folios give a better picture.
• What about leaders and laggards? Again, silver AUM led the growth at 333.46%, followed by domestic index funds at 122.64% and Gold ETFs at 70.26%. A total of 10 out of 12 categories saw folio expansion, with debt index funds (ex-TMIF) contracting -4.65% and debt oriented TMIFs contracting by -1.72% in AUM in October 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. The past experience has been that passive funds do extremely well when the active funds start to become too volatile. That trend has been evident in the last couple of months!